Power Watch: All-India Energy Demand on a Recovery Path

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India Ratings and Research (Ind-Ra) has published the September 2020 edition of its credit news digest on India’s power sector. The report highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions by Ind-Ra.

In August 2020, the all-India energy demand contracted 2.0% yoy for the sixth consecutive month to 109.8 billion units. However, it continued its recovery, as the decline in power demand narrowed during the month (down 2.0%; July 2020: down 4.1%; June 2020: down 10.9%). This was led by an improvement in demand from the northern region (up 1.3%; July 2020: down 0.8%) and southern region (down 4.5%; down 9.8%), due to the further lifting of lockdown for certain economic activities under Unlock 3.0. Despite the energy demand showing signs of recovery, demand over April-August 2020 was lower by 11.0% yoy.

Electricity generation (excluding renewables) declined 2.6% yoy to 103.4 billion units in August 2020 (July 2020: up 0.1%; June 2020: down 11.8%), owing to a 2.4% yoy decrease in thermal generation. Thermal plant load factor (PLF) declined to 49.0% in August 2020 (July 2020: 52.9%; August 2019: 51.4%) on account of the lower demand. Central, state and private sector PLFs declined to 58.5% in August 2020 (August 2019: 59.4%), 38.3% (42.9%) and 51.0% (52.2%), respectively. Thermal PLFs were the most impacted due to the decline in power demand over YTDFY21, given the must-run status of nuclear, hydro and renewables.

The short-term power price at Indian Energy Exchange continued to be low at INR2.43/kWh in August 2020 (August 2019: INR3.32/kWh; July 2020: INR2.47/kWh), as the difference in buy and sell bid volumes widened to negative 5,042 million units (negative 2,862 million units). The increased power demand in the short-term power market was on account of favourable prices on the exchanges for both distribution companies and open access buyers and the gradual lifting of lockdown.

The coal production by Coal India Limited increased 7.1% yoy to 34.7mt in August 2020 (August 2019: 34.7mt; July 2020: 37.4mt) after decreasing for four consecutive months, owing to higher production at its key subsidiaries – Mahanadi Coalfields Limited (up 45.6% yoy) and Northern Coalfields Limited (up 7.6% yoy). The coal inventory at thermal power stations rose 74.8% yoy to 37.7mtpa in August 2020 (August 2019: 21.6mtpa; July 2020: 40.6mtpa; June 2020: 47.7mtpa), due to continued coal production, as coal is an essential service, despite the subdued demand. The recovery in power demand over April-August 2020 led to a gradual rise in coal offtake over the same period (August 2020: 44.34mtpa; April 2020: 39.06mtpa). However, Coal India’s coal supply to the power sector remained lower 19.5% yoy over April-July 2020 at 126.3 million tonnes.

The transmission line addition had been lower over January-August 2020, with 7,338 circuit kilometres (km) added (January 2019-August 2019: 12,000 circuit km) although the length of transmission lines added in August 2020 was higher at 1,172 circuit km (August 2019: 803 circuit km), with 88.7% of addition coming from the state sector.

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