Economy

Covid-19 effect: Electricity prices plummet on IEX

M Ramesh Chennai | Updated on April 03, 2020 Published on April 03, 2020

Prices of electricity on the spot market have come down in the month of March, even as the volume of power traded on India’s premier energy exchange, IEX, increased, as consumers shifted to the option of buying on the market.

The average market clearing price (price at which deals were concluded) in the day-ahead market (DAM), in March, was ₹2.46 a kWhr, 21 per cent down from ₹3.12, recorded in March, 2019. However, there was a pick-up in volume traded, growing 18 per cent over March 2019, to 4,291 million kWhr on the DAM. In the term-ahead market (TAM) segment, the increase was 30 per cent and the traded volume was 320 million units.

Discoms in South India preferred to buy on TAM, a press release from IEX said. One-Nation One-Price prevailed for 24 days during the month. The peak demand in March was 170 GW, on the 20th of the month, marginally higher than 169 GW in March 2019.

It may sound counter-intuitive that traded power volumes increased when economic activity was slim, but it is logical. As power purchasers (mainly, state government-owned electricity distribution companies) find the option of buying on the spot market attractive, they buy more here rather than from the power plants with whom they have long-term purchase contracts.

The low prices offer the discoms “a compelling opportunity to reduce their financial burden,” said the release.

Speaking to BusinessLine, Rajesh Kumar Mediratta, Director-Business Development, IEX, observed that ₹2.46 a kWhr was the average DAM price for March, but prices hovered at ₹2 a kWhr in the last week of the month, when the lockdown happened.

Economical buy

Discoms stop buying from their suppliers under long-term contracts and buy power from the spot market instead, but they still have to pay their long-term suppliers the ‘fixed charges’. Discoms find it economical to purchase from power on the exchange even after paying the fixed charges, Mediratta pointed out.

IEX has vowed to make power available uninterrupted to discoms as well as critical sectors such as healthcare and public utilities “in the wake of the pandemic”. With ample power availability and low prices, the distribution utilities and open access customers can access the IEX platform for their uninterrupted power requirement during this hour of need, the IEX release said.

Answering a question, Mediratta said that IEX was in the process of assessing demand for power on the spot market in 2020-21, under different scenarios, because the outbreak of the pandemic has made all the previous budgeting of IEX infructous.

Published on April 03, 2020

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