Mumbai: The country’s biggest power generator, NTPC Ltd, and Power Finance Corp. will create India’s third electricity exchange as utilities boost capacity to help end blackouts and sustain economic growth.
NHPC Ltd, the country’s biggest producer of power from water, and Tata Consultancy Services Ltd will join the venture, New Delhi-based NTPC said in a statement to the Bombay Stock Exchange on Monday.
State and private utilities plan to almost double the country’s generation capacity in a decade, wiping out peak shortages of as much as 15%. Indian power exchanges conduct spot trade in electricity, which is usually sold in the country through contracts, and will allow captive plants run by firms to sell surplus power.
“The exchanges will help build a spot market,” said Girish Solanki, a Mumbai-based analyst at Angel Broking Ltd. “Cement, steel and sugar producers already have shown keen interest in trading power on the existing exchange.”
Financial Technologies (India) Ltd, founder and majority owner of the world’s third biggest gold exchange, started the Indian Energy Exchange, offering day-ahead trades, on 27 June. The National Commodity and Derivatives Exchange said in June it won approval to set up a competing platform.
The government plans to spend $100 billion (Rs4.2 trillion) on generation, transmission and distribution of power to meet growing demand. Electricity shortages and bad quality of supply probably cost Asia’s third biggest energy consumer as much as 2 percentage points of annual growth, according to the Asian Development Bank.
India will need to spend $600 billion on adding capacity to meet electricity demand, which may treble to 335,000MW by 2017 if the current growth rate is maintained, according to McKinsey and Co.
The second fastest growing major economy needs to add 40,000MW each year to meet the predicted demand, which exceeds current estimates by 100,000MW, McKinsey said in a report in June. The projected requirement is more than double India’s generation capacity of more than 140,000MW as of 31 January.
Power firms sell electricity in units, which is 1kW consumed in one hour, or the energy used when a 100W light bulb burns for 10 hours. Bloomberg