Finally a reprieve for power producers
The August data should provide some reprieve for electricity producers who are otherwise struggling with subdued demand and low tariffs. Electricity generation was up 7.9%, compared to a 6.6% rise in July and 2% in June.
Importantly, thermal power generation jumped 14.9% and utilization levels also improved in August, possibly to make up for the shortfall in nuclear and hydropower generation. Further, generation in July and August was aided by a favourable base. But demand in general was also strong.
Volumes in the spot electricity market at the Indian Energy Exchange (IEX) increased 15.5% last month. Encouragingly, the growth is accompanied by a rise in tariffs. Prices jumped 44% from a year ago to Rs3.13 per unit in August, the highest in almost two years. For Monday delivery, the average market price stood at Rs5.08 per unit, double the rate in the previous fiscal year.
According to IEX, demand increased from the southern region which is facing the double whammy of lower-than-normal rains and higher temperatures. So much so that interstate transmission (import of electricity) remained congested in the south. “Overall 102 MU (million units) were lost due to congestion and daily average volume loss was 3 MU vis-à-vis overall volume loss of 51 MU and daily average loss of 2 MU in July,” IEX said in a statement.
Improved availability and greater usage by the rural and agriculture (for pumpsets) sectors are said to be driving electricity demand in Telangana and Karnataka.
According to an analyst with a domestic broking firm, local events like maintenance of power plants or change in festive dates (Ganesh Chaturthi came in September last year) could also have led to the demand spurt.
Even then there is no denying that volumes were strong in August. This should bode well for electricity producers, especially for the firms that are more dependent on spot electricity markets. JSW Energy Ltd, which has open capacities in Karnataka (lacks power purchase agreements), should see some benefits in the form of better realizations and sales.
It has to be seen, though, how long the current trends hold. Demand and price spurts earlier proved to be seasonal or accompanied by sowing season or high usage by farmers (greater usage of pumpsets to draw groundwater in rain-deficit years). Will this time prove different? The coming months will provide clarity.