Power demand is expected to grow by 6-7 per cent y-o-y in the January-March quarter this fiscal aided by an intense cold wave in North and North-East India as well as rising industrial and manufacturing activity.
“Demand has sustained into January 2023, with the first eight days posting an y-o-y increase of 14 per cent, Crisil Market Intelligence & Analytics said in a report on Monday.
“We expect demand to grow a healthy 6-7 per cent y-o-y in the fourth quarter owing to an anticipated severe cold wave across parts of the country as well as healthy economic activity. For the full fiscal, electricity consumption is slated to grow at a decadal-high of 9-10 per cent vis-à-vis 8.2 per cent in FY22,” it added.
Anticipating a rise in power consumption, the Central Electricity Regulatory Commission (CERC), in a suo motu order on December 28, extended the price cap of ₹12 per unit on all market segments at power exchanges until further orders.
In December 2022, Crisil pointed out, peak demand rose by a sharp 12 per cent y-o-y and 9 per cent m-o-m to 206 GW, this time because of increased heating requirement following the onset of winter as well as continued momentum in manufacturing activity, which rose to a 25-month high during the month, as signalled by the Purchasing Managers’ Index.
Short-term power market
To cater to the rising demand for electricity, power companies are increasingly turning to the short-term power market, Crisil said.
The share of short-term power market in overall generation increased to 6.4 per cent in Q3 FY23 from 5.1 per cent in Q2 FY23 well above the long period average of 4.6 per cent over 69 months.
“This share, though, was slightly lower on-year vis-à-vis 6.7 per cent in the third quarter of fiscal 2022, when the country faced a severe coal supply crisis, which impacted generation,” the agency pointed out.
Generation in Q3 FY23 was affected by seasonally lower output from renewable sources, leaving costly thermal power to service incremental demand.
Overall generation declined sequentially in the quarter, with the combined output from hydro and wind plunging 50 per cent owing to seasonality issues. Despite 4 per cent m-o-m increase in generation from hydro and wind combined in December, generation from thermal grew 9 per cent over the same period to service the incremental demand.
Evening peak load is typically serviced by hydro power. Lower hydro generation of 10 per cent m-o-m in December 2022 increased dispatches of coal generation to service the evening peak, Crisil explained.
But elevated coal prices in spot e-auctions, along with winter heating demand, increased on-month prices 17 per cent during the month.
“The continuing rise in power demand in January on account of high heating demand and robust industrial activity further pushed up prices to ₹6.79 per kWh as of January 10. Pressure on prices was exacerbated by an all-India energy shortage, which rose a whopping 429 per cent in the first 10 days of January over December 2022,” it added.