India’s power demand in the current month is likely to have risen 10-12 per cent Y-o-Y to 140-142 billion units (BU)—the highest in the last five years—as deficient rains coupled with humidity led to a higher requirement for cooling.

The month began with peak power demand met during the day breaking all past records and hitting almost 240 gigawatts (GW) on September 1.

“Power demand continued its growth momentum in September, logging a 10-12 per cent growth on-year to a five year high of 140-142 BU, but declined 7 per cent on-month after what was the driest August in nearly a decade,” CRISIL MI&A estimates indicate.

Power demand

In fact, post the deficit monsoon pan India in August, the recovery in September still could not prevent two successive months of all-time high peak power demand – 238 GW in August followed by a higher 240 GW in September, it added.

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“Apart from agriculture, industrial and manufacturing activities also contributed to the sharp rise in power demand, which can be gauged by the Manufacturing Purchasing Managers’ Index rising to a three-month high of 58.6 in August. And with the onset of the festive season, this trend is likely to have continued well into September,” Crisil said.

Overall power generation is estimated to have risen 9-10 per cent on-year in September to 150-152 BU, after surging to a record high of 159 BU in August 2023. To cater to the rising demand for electricity, generators have increasingly been turning to the short-term power market, it added.

Exchange prices

The short-term markets, however, have moderated in September. Compared with the first week, the situation in the third week had improved because of healthy pickup in hydro generation, which led to both volumes (around 14 per cent drop on month) and peak prices (Rs 9.37 per unit from Rs 9.60 per unit in August) in DAM dropping sequentially, while RTM growth remained healthy.

While solar and wind face intermittency issues, hydro enables steady supply of power and helps counter the intermittency. However, disturbed rainfall contributed to a decline of hydro power generation, which, combined with a slip in the share of wind, led to peak prices being recorded in high frequency time blocks on the IEX DAM in August and the first week of September, Crisil explained.

“In September, CRISIL MI&A Research, though, observes that the share of non-fossil fuel in generation did improve to 26 per cent by week three from 23 per cent in week one, providing some support to coal generation, thereby reducing pressure on the short-term market towards week three,” it added.

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