Spot power prices soar – The Railways and Coal India have to work harder to fix this

28th May 2018

While the soaring prices of spot power are in the news, the shortage of coal seems to be getting less attention. Estimates from the Central Electricity Authority (CEA) put the stock of coal at 45 power plants at less than four days’ supply. The four major NTPC plants, the CEA says, have virtually no coal at all. These scarcity levels have been seen before, and coal will be rushed so none of the plants will actually stop generating power. However, given that, at close to $100 per tonne, importing coal may not be a viable option for too many Independent Power Producers (IPP), the government needs to get Coal India Limited (CIL) to produce more.

Those private sector producers who blend local coal with imported coal are unable to do so beyond a point, given coal prices are at $100 per tonne. Rakes availability for coal supply has been an issue for some time, and private sector power plants do not get priority in this. As against requirement of 288 rakes of coal per day—all utilities across the country—the average supply by Coal India Limited (CIL) was about 245.7 rakes per day in April. As of now, therefore, it is the supply-side issues that are aggravating the situation; the demand hasn’t really shot up although the mercury has.

Spot prices of electricity, however, have gone through the roof—hitting Rs 11.41 per unit earlier this week. This is important but not critical since the volumes in this market comprise just about 5-6% of the total electricity used in the country. Also, Rs 11.41 is probably the peak rate, limited to some pockets. Otherwise prices in the market are ruling at around Rs 6-7 per unit—a 50% or 60% jump over the average—and nudging `8 in some states. The all-India average price for power sourced from coal-based power plants is Rs 3.53 per unit.

Some of this is due to the disruption in transmission lines, caused by the recent thunderstorms, which should soon by up and running. However, the quantum of electricity offered on the exchanges has fallen—IPPs offered 6,438 MW for Tuesday against demand of 9,119 MW from the states. That is because the plants are short of coal. States are contracting more short-term PPAs, typically for three-month periods during the summer. Among these, are one by Bihar for 600MW, one by UP for about 1,500MW, and by Maharashtra for 1,200MW.

The worst hit have been the captive power plants, which are completely starved for coal—since there is a preference for utilities. If they buy from the power exchanges at Rs 6.50 or Rs 7 per unit—including open access charges and transmission and wheeling charges—the landed cost would end up at Rs 15 per unit. That then would make their businesses completely unviable.

Source: FINANCIAL EXPRESS