Ind-Ra: Demand Eased with Onset of Winter, Short-Term Power Exchange Prices Reduced due to Better Coal Availability

India Ratings and Research (Ind-Ra) report on India's power sector, highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions.

In November 2017, power generation, excluding that from the renewable resources, increased 1.7% y-o-y to 95 billion units (BUs). The increase was driven by a higher generation across all sectors including thermal, hydro and nuclear. In November 2017, all India energy requirements increased 5.4% y-o-y to 93BUs, although the energy requirement declined by 8.2% from October 2017 due to the seasonal variation and drop in temperature across northern India.

Coal production by Coal India Limited increased 2.6% y-o-y in November 2017. Coal production by Coal India Limited has been on an increasing trend post July 2017 where it declined to the lows of 37mt. Further coal inventories improved on account of improved coal production and lower coal requirement due to an ease in power demand. Coal inventory levels at power plants improved to 10.2mt on 30 November 2017 (31 October 2017: 7.9mt; 30 September 2017: 8.5mt; 31 August 2017: 11.9mt).

Higher power availability with improved coal availability and lower demand led to a decline in the demand for short-term power on exchanges in November 2017 compared to previous month. Short-term power prices declined to INR3.55/unit in November 2017 (October 2017: INR4.08/unit). In November 2017, the difference in total buy and sell bids at Indian Energy Exchange turned negative, indicating a decline in demand for short-term power.

Power generation from the renewable sources improved by 4.4% y-o-y to 6.6BUs in October 2017 on account of improved generation from the solar sector due to its higher installed capacity and marginal improvement in plant load factor. Wind generation continued to decline in October 2017 due to lower plant load factor. The share of renewables in the total energy generation improved marginally to 6% in October 2017 from 5.9% in October 2016.

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