KOLKATA: Increased demand for thermal power and less-than-adequate coal supply have pushed spot power prices to a two-year high of Rs 6.20 per unit on Tuesday and this spike is likely to be passed on to citizens of some states.
The Rs 6 per unit mark was last breached in 2016. Prices hovered at Rs 4 per unit levels early last week before spiralling up as demand for coal-fired power inched up and prices at the largest power trading firm, Indian Energy Exchange, increased more than Rs 2 per unit in seven days.
More than average demand for thermal power from northern states along with collapse of a crucial transmission line that sends power from western India to northern states such as UP, Rajasthan, Delhi, Haryana and Punjab pushed up prices in these states to near Rs 8 per unit on Monday. They are now ruling at Rs 7.43 per unit levels.
Though most analysts say the high rates may not hold, industries buying power directly from exchanges will see their costs go up. Distribution firms from Gujarat, Maharashtra, West Bengal, Bihar, Andhra and Tamil Nadu buy power from spot market to meet supply shortfall. If they are forced to buy costly power, as is the case now, the cost will be passed on to retail and industrial consumers via higher tariff.
The extent of the hike in a consumer’s electricity bill will depend on the state power regulator who decides on how much of the hike in power purchase costs is to be passed on. A state power official said the regulator allows them to pass it on to consumers in most cases.
Rajesh K Mediratta, director, business development at Indian Energy Exchange, said increased demand for power was also aided by less-than-anticipated hydel generation, transmission snags as well as outages of power generation units in North India over the last one week.
A power sector official said hydel generation fell short by about 1,300 mw in May from a year ago. Supplies from other generation sources like diesel power, lignitebased units and import from Bhutan were less than anticipated. The shortfall in supplies from non-thermal sources is also exerting pressure on spot power prices.
Mediratta said that the demand from captive coal-fired power generation units have also started to inch up from states like Odisha. It is expected to rise in the near future as the Centre recently asked Coal India to regulate supplies to captive power plants.
Mediratta said that the demand from captive coal-fired power generation units have also started to inch up from states like Odisha. It is expected to rise in the near future as the Centre recently asked Coal India to regulate supplies to captive power plants.
“Increase in demand growth, seasonality in demand coupled with the supply-side constraints caused by factors such as shortfall in coal supply to power generation stations due to logistical issues have led to a jump in average shortterm traded power tariffs on the power exchanges,” said Sabyasachi Majumdar, senior V-P at ICRA.
“In our view, the current high prices in the short-term market are unlikely to sustain and are likely to remain at about Rs 3.5 per unit in the medium term, given availability of surplus thermal power capacity, prevailing relatively subdued capacity utilisation & increasing share of renewable energy in the generation mix,” Majumdar said.
Source: economictimes.indiatimes
