Covid-19 lockdown impact: Power demand drops as offices stay plugged out

New Delhi: India’s electricity demand plummeted this week as factories and offices were forced to close due to the Covid-19 lockdown. Peak demand touched a low of 135 GW on Sunday against an average of about 155 GW in March last year, pushing spot power prices on the Indian Energy […]

New Delhi: India’s electricity demand plummeted this week as factories and offices were forced to close due to the Covid-19 lockdown. Peak demand touched a low of 135 GW on Sunday against an average of about 155 GW in March last year, pushing spot power prices on the Indian Energy Exchange (IEX) to a near-record low.

The price discovered on the IEX Day Ahead Market for delivery on Wednesday was at ₹1.95 per unit. The spot power price hit a low of ₹1.90 per unit in June 2017 due to excessive rainfall.

Sources said the closure of offices and factories, reduced buying by state distribution utilities and the Indian Railways stopping passenger services resulted in the slump. Demand from the industrial hubs of Maharashtra, Gujarat, Rajasthan and Tamil Nadu besides that from Punjab’s farmers dropped substantially. However, there was some respite for power generators as hot weather conditions in southern and western India on Wednesday led to higher demand.

‘State Utilities can Optimise Costs’

“The average clearing price since Sunday is at Rs 2.15 per unit and price discovered on the Day Ahead Market for delivery March 25 is at Rs 1.95 per unit,” said Rohit Bajaj, head of business development at IEX. “Moreover, the sell bids on the exchange have been 2.5 times the buy bids, which demonstrates the availability of ample liquidity for utilities to procure power reliably.”

This marks a compelling opportunity for distribution utilities to optimise costs, thereby reducing their financial stress, he said.

“This also ensures 24×7 uninterrupted power supply to end-consumers, who are staying home during the lockdown,” Bajaj said.

For distribution companies, power availability at such low rates will enable enhanced savings and an improvement in financial health. Discoms in India are struggling with heavy losses and dues.

“Fiscal prudence during this hour can help them wipe off a large part of this financial loss given that this trend of low prices may continue as the Covid-19 situation unfolds,” Bajaj said.

Power demand picked up in January after declining for five consecutive months. Electricity demand is seen as an important indicator of economic health, although the January 31 Economic Survey had suggested that it was not.

In December, power demand fell 0.5% from the year-ago period compared with a 4.3% fall in November. The drop was the most in October, at 13%, led by a sharp reduction in demand from Gujarat and Maharashtra.

Covid-19 is expected to have a major impact on India’s stressed private power sector with distribution companies halting payments to generation companies as state electricity departments are not taking coercive action to recover money from consumers.

Policy interventions by the government are required to salvage the discoms and private power assets, many of which are on the verge of default, said Ashok Khurana, director general of the Association of Power Producers lobby group.

The companies have sought a moratorium of six months for payment of interest and repayment of loans. They have also asked that the Reserve Bank of India’s June 7, 2019, circular, which mandates action against single-day defaults, be set aside for six months. The companies have asked for higher working capital limits, reduction of interest rates and additional funds for projects under implementation among other things.

Source Article

Lois C. Ferrara

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