Spot prices of electricity at the Indian Energy Exchange (IEX) have skyrocketed due to a surge in demand from state-owned discoms. For the peak-demand 8 pm slot, for instance, deals were clinched at a stratospheric Rs 9.38 per unit on Tuesday, up 200% from the August average of Rs 3.13 a unit. Slippages in hydro power generation owing to reduced water levels in reservoirs in many parts of the country, especially in the south, is believed to be the main reason for the higher demand for spot power. Hydro power generation fell from 541 million units (mu) on August 11 to 523 mu on September 11. Telangana discoms purchased 40 mu of power on the IEX platform for Wednesday, against 10-15 mu it used to buy from exchanges until recently.
At this rate, the state is meeting an unprecedented 25% of its daily power requirement from spot buys. Just about 10% of the total power sold in the country is traded through IEX.
The increased demand for spot power has allowed many generators without long-term power purchase agreements to tap the lucrative market aggressively. “Many units like Teesta Urja and JSPL (Tamnar) sold almost all their power on the exchange last month,” a person with knowledge of the situation said.
The daily average price on the IEX surged 30% in a week to Rs 5.14 per unit on September 13. Average spot market price on the corresponding day last year was Rs 2.56 per unit.
About 4,000 mu of electricity was traded on IEX platform in August. While power demand at the exchange hovered in the range of 120-140 mu in the seven days to September 13 last year, the same was higher at around 170 mu in the corresponding period this year.
Experts said that the spike in prices of spot power may also signal the beginning of the end of the low spot-market price era, unless large distressed power generation assets become viable and become able to firm up long-term fuel supply agreements. “Demand has continued to rise but base-load power generation capacity addition has reduced to a trickle,” said Kameswara Rao, partner, PwC. Also, some power plants facing insolvency proceedings are unable to act on fuel-side issues for now, he added.