Rise in short-term power prices due to demand-supply mismatch of coal: India Ratings

7th May 2018

Short-term power prices on the exchange rose to Rs 4.02 per unit in March 2018 from Rs 3.23 per unit in February due to increase in seasonal demand, inadequate availability of coal with the thermal generators and decline in nuclear and hydro power generation, according to India Ratings and Research, a Fitch Group-owned credit rating agency.

In March 2018, all-India energy requirement increased 6.6 per cent to 105.2 billion units (BUs), while available energy increased 6.1 per cent to 104.4 Bus as compared to the corresponding month last year, leaving a power deficit of 0.8 per cent in March 2018 as against 0.4 per cent in March 2017.

According to the report, the increase in demand was met through improved generation from coal-based thermal power plants which was up 5.3 per cent in March 2018. All India electricity generation excluding renewable sources grew 3.1 per cent to 105.8 BUs in March 2018. “During FY18, electricity generation grew 4.0 per cent. The increase in coal-based thermal power was accompanied by an improvement in the thermal plant load factor (PLF) to 65.3 per cent in March 2018 from 63.1 per cent in March 2017,” it said.

Another factor that helped in meeting the rising demand was the increase in generation from the renewables which improved 30.8 per cent to 7.5 BUs in February 2018 on account of improved generation from wind and solar sectors, due to higher capacities and marginal improvement in PLFs.

The renewable energy sector posted strong capacity addition during 2017-18 with solar capacity increasing 9.4 Gigawatt to 21.7 Gw boosted by competitive bidding. Wind capacity addition also increased by 1.8 Gw to 34.0 Gw during FY18, of which 1.2 Gw came in the fourth quarter. However, it has still been lower owing to the unwillingness of the state distribution companies to sign long-term power purchase agreements at higher feed in tariffs.

In March 2018, coal production by Coal India Limited rose 9.4 per cent to 72.3 million tonnes (mt). With increasing coal production, coal stocks at 113 power plants witnessed an upward movement at the end of March 2018. Coal stocks improved to 16.3 mt in March, up 3.8 per cent over February 2018. Although the overall coal inventory level increased at end-March 2018, the number of plants with critical and super critical levels further increased to 28 from 20 in February 2018, due to non-uniform distribution of coal across plants throughout the country.

Source: ET ENERGYWORLD