Ind-Ra: Short-Term Power Prices Increase, Driven by Higher Demand

Short-term prices shot up to INR4.67/kWh in May 2018 due to increased power demand. India Ratings and Research (Ind-Ra) has published the June 2018 edition of its credit news digest on India's power sector. The report 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.

The total buy bids were higher than the sell bids at Indian Energy Exchange with a deficit of 317.7 million units in May 2018, driven by the peak summer season, lack of adequate coal availability, low hydro generation and slow pickup in the wind power generation in the southern and western states.

In May 2018, all-India energy requirements increased 4.6% yoy to 112.3 billion units (BUs) while available energy increased 4.8% yoy to 111.6BUs, leaving a power deficit of 0.6% (May 2017: 0.7%). Peak demand deficit also remained high at 1.4% in May 2018, although lower than 1.9% in May 2017. The peak demand deficit increased for the western region especially for Gujarat, driven by the lower energy supplied by private generators due to coal shortage, non-availability of water and technical maintenance.

The increase in power demand was met through higher electricity generation (excluding from renewable sources), which increased 3.1% yoy to 110.6BUs, driven by a 5.2% yoy increase in thermal power generation and a 10.4% yoy rise in nuclear power generation. However, generation from hydro power declined 14.3% yoy. Thermal plant load factor also improved to 65.3% in May 2018 from 64.4% in May 2017.

The increase in demand is also being supplemented by a 21.4% yoy improvement in renewable generation to 8.4BUs in April 2018, on account of improved generation from the solar sector. Solar energy generation increased to 3.2BUs in April 2018 from 1.8BUs in April 2017. However, wind generation declined to 3.3BUs in April 2018 from 3.6BUs in April 2017.

Coal India Limited's monthly coal production increased 15.7% yoy to 47.1mt in May 2018, aiding the growth in thermal generation. However, coal inventory at power stations remained low, driven by an increase in coal demand owing to the peak summer season and number of power stations with critical and supercritical levels remained high at 25 for May 2018.

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