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Power Prices Steady Despite Peak Demand Surge

India’s energy market, electricity prices on the Indian Energy Exchange (IEX) have remained stable despite a significant rise in peak power demand.

Over the past fortnight, prices on the Day-Ahead Market (DAM) and Real-Time Market (RTM) have averaged Rs 5.2 per unit and Rs 4.6 per unit, respectively, mirroring last year’s rates. This stability in spot market prices is noteworthy given the unprecedented peak demand levels.

On May 23, the country’s peak power demand reached a record 236 gigawatts (GW), with total outages standing at 27.71 GW. During the day, prices on the exchange recorded rates below Rs 3.5 per unit, as per data from IEX. This price stability is largely attributed to measures taken by the power ministry, which mandated the supply of surplus electricity by generating companies to power exchanges. Industry experts credit this directive for helping to maintain steady prices even as demand surges. The power exchanges have seen significant growth, with volumes doubling in FY24 compared to an 8% increase in demand last year, according to a recent report by ICICI Securities. The Central Electricity Authority reported that as of May 21, India generated 4.76 billion units (BU) of electricity, surpassing the target of 4.56 BU. From April to May 21, the country’s power companies generated 233.28 BU, a slight deviation of 2.6% from the target of 239.5 BU.

The government anticipates peak power demand to reach a record 260 GW this summer and has implemented several measures to ensure an adequate electricity supply. These measures include the mandatory operation of imported coal-based plants at full capacity and a six percent coal blending requirement for domestic coal-based plants. As of May 21, coal stocks at 184 thermal power plants stood at 47.5 million tonnes, which is 67% of the normative stock requirement of 70.56 million tonnes.

In April, the peak power demand met was 224.18 GW, up from 215.88 GW during the same period last year. Power consumption in April reached 144.25 BU, marking a 10.5% increase from 130.55 BU in April FY23. The Indian Meteorological Department reported that April temperatures were the highest recorded over eastern and northeastern India and the second highest over southern India since 1901. This has contributed to the growing peak power demand as heatwave conditions persist in various parts of the country.

The measures taken by the government and the power ministry have been crucial in maintaining price stability in the face of rising demand. The continued emphasis on surplus power supply and strategic coal management has ensured that the market remains resilient. As the summer progresses, it will be critical to monitor these dynamics to ensure the sustained stability of spot power prices in the country.

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