Electricity prices on exchanges plunge, down a half in past 2 weeks

The average market clearing price for both the day-ahead (DAM) and real-time (RTM) markets declined by 50% on year during the last week of February.

The average RTM price for the first five days of March was at Rs 2.8 per unit, down by 57% on year, while average DAM price for the period was at Rs 3.7 per unit, down by 53% on year on the India Energy Exchange, as per the official data.

“One of the major reasons has been an increase in the “sell side” liquidity on the exchange, which has increased by almost around 90% in the first five days of March, and it was almost 50% in the month of February,” the exchange said.

Moreover, the industry projects the lower electricity prices to sustain for the near to short-term period which presents an opportunity for distribution companies and industrial consumers to optimise their power procurement costs.

“The demand is quite favourable. So, because of the reduction in prices, the distribution companies will find it lucrative to buy on the exchange,” a power industry source said.

The increase in the liquidity on the sell side can be attributed to the increase in demand for power and the robust capacity additions targets put up by the government. “Even on the gas front, a year back, the prices of gas were really high. And now they have come down to $8-$8.5 per MMBtu. So, some of the gas based capacity is also available,” the source said.

“And at least for the next few days, if you look at the weather forecast too, the month of March is expected to remain ambient. For the next few days as well, we don’t think that there is going to be any major correction in terms of prices, there might be some upward trend in between, as the festive season is also coming. But the overall demand is expected to be less.”

Talking about the country’s growing demand for energy, the industry forecast a 7-8% growth in the country’s energy consumption from last year during summer. The peak demand in the summer months is expected to touch 260 GW, as per government’s projections.

However, the supply side constraints may remain limited this time and the power deficit, if at all, is likely to remain at the lower end, said the source. “This year, because of the new capacity additions, and with gas being a big boom as well, the prices have come down so much that a lot of gas based capacities will also start opening and selling their power. So, that is also expected to be good.”

The country’s coal stocks are also expected to touch 155 million tonne by the end of March, as per coal ministry’s projections which depict a healthy supply side situation for the country’s thermal power plants.