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Business News/ Companies / People/  ‘Power prices to decline on easing demand’

‘Power prices to decline on easing demand’

Coal production has increased by 25% y-o-y with over 20% hike in dispatches to power units in the first four months, says Rohit Bajaj, head-business development, IEX

Rohit Bajaj, head of business development at Indian Energy Exchange.Premium
Rohit Bajaj, head of business development at Indian Energy Exchange.

NEW DELHI : Power prices in the country are likely to fall going ahead with demand expected to ease in the coming months, said Rohit Bajaj, head of business development at Indian Energy Exchange (IEX). In an interview, he said the coal stock situation has also improved, which would support an anticipated spurt in demand for power during September-October. Edited excerpts:

How has 2022 been for IEX as the power sector has largely been eventful?

The year has been good in terms of revival of demand. We have seen demand come in very big numbers. Overall, countrywide, we have seen over double-digit growth in the first five months, which is very positive but our realization in terms of conversion of demand into our volume is little less. This year, we have seen almost 20% more demand coming to our platform but the problem is there are sell-side and supply-side constraints, due to which we are not getting a clear volume. Our transaction fee is on the basis of the final quantum getting cleared.

Prices of imported coal have increased almost 200% of what it was last time (year)...and this is resulting into discovery of very high prices. With all these things in place, we are meeting more than 90% of the demand from domestic coal. The remaining part we are importing. All these factors have resulted in high prices this year.

Overall, we are almost flat in terms of volume till August. There is no growth till now. But, going forward, we expect things are going to reverse. Due to government intervention, 2-3 things have happened. First of all,we are seeing major increase in coal production. With over 25% increase in coal production on year-on-year (YoY) basis and more than 20% increase in dispatches to power plants in first four months, coal stock availability at power plants has increased. It was about 7 days few months back and it has increased to an average of 11 days now.

What is your outlook for the September-October when another crunch situation is expected?

In September and the coming months, high demand is going to be there. Because, this is the time agriculture load is going to be there. But our preparedness is much better than March-April when average price went up to 10 (per unit). We are much better prepared in terms of coal stock position, not many plants are under maintenance, people have deferred their maintenance, availability of plants is much better as compared to March-April. Several imported coal-based plants are running.

We believe that the worst is behind us. Though demand is going to be there in the coming months, coal stock position is much better. So, prices will not probably go to that level. It has started to ease out now. It will only improve going forward. November onwards, the overall demand will be less. In September, the hydro generation will continue to be there. That is also supporting us in a big way.

Your target for last year was 100 billion units. What is your target for this year?

Till now, we have seen good demand growth of over 10% which will continue as economy is growing. This year, in the initial 4-5 months, we were facing supply-side constraints which have started to ease now as coal supply and inventory position is improving. Last year, we did (traded) 100 billion units. This year, we expect that as prices will come down, participation will increase further as state discoms will start to optimize their portfolio by buying from exchange and replacing costlier power. The prices have come down. In April, it was 10 , this month it is close to 5. That way it has come down drastically and this trend is likely to continue and we can expect growth momentum to be there again.

What has been the share of renewable energy share this year?

There is tremendous potential i n green energy. Percentage of green energy put together, traded this year is about 8% of electricity. Today, some of the renewable rich states, those who are meeting their RPO fully and have surpluses they are selling. States like Karnataka, Andhra Pradesh, Telangana, these are the three major states on the sell side and buyers are many including all the northern states...So, less seller, more buyers...this is a restraining factor here.

What new products and services are you planning to launch product or services going ahead?

Yes, one is ancillary services. The regulation is there and the date of commencement will be notified by the regulator. We expect that in another 4-5 months we would be in a position to launch this. Ancillary market is one where you are actually reserving the capacity. The system operator is buyer of capacity. All the generators who have surplus are seller of this capacity. They place their bids, system operator will keep the capacity with itself and whenever there is more demand and requirement for more power and supply is less, then they will give instruction to start supplying. This is ancillary services. Globally also this is very popular concept and widely used.

We are also working on a concept for gross bidding. We are going to launch that also. Gross bidding is a tool which help the distribution company in optimising their portfolio. You can identify which is your highest cost variable power and you can sell all that power on exchange and the buyer which is there corresponding to his requirement can buy from the market. This is widely used in Japan and Europe. We have applied for approval to the regulator CERC and once we have the approval in place we will launch. In 3-4 months, we should be in a position to launch this. There is also lot of work going to have capacity contracts which are not there in India till now.

What are your plans regarding battery storage?

It is little far-fetched. We are getting prepared. In battery storage, exchanges are providing very good solutions globally. There are very good options which are there. We are aware of those options. We are also working in those directions but it will take some time. Because even today the commercial viability of batteries is being questioned. It will take couple of more years for it to be commercially viable. But yes, exchanges will play a very big role. There are concepts of auto-bidder where exchanges will provide you the flexibility of picking up lowest prices. They are available globally, this kind of solutions will be available in India also.

Do high discom dues impact you?

We have been operational for so many years. None of the cases we have seen any default in the payment. So we know that there is a situation where financial situation is not very good but since till now exchange are only part of their total procurement and this part is not very high. All India average is 7.7%, there are state which buy 15% also from exchange. So, till now we have not faced any difficulty in taking money from the distribution companies. They are buying and paying in time.

LPS (late payment surcharge) rules are where they have to clear all their pending dues to ensure that they participate in exchange market. So few weeks back there were 13 defaulting states which were barred from participation in exchanges and this happened after 75 days period after June 3 got over, that particular day 13 states were at default. within 2 -3 days everybody paid. It is good for the sector, good for everybody because it will lead to better collection efficiency. Somewhere it will improve the system as whole.

Does the barring of discoms from exchanges under LPS norms affect your operations?

No. We get to know in the morning and we deactivate them (their trading). They cannot participate. But most of the time before 12 pm they get approval as they clear the dues. We have not seen any impact.

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Published: 13 Sep 2022, 12:59 AM IST
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