Spot power prices plunge nearly 50% as demand wanes after Diwali

Spot power prices in the country have almost halved post-Diwali from above Rs 5 per unit-levels seen in the later part of September and early October, with the average market clearing price falling to Rs 2.88 per unit just a day after the festival of lights was celebrated.

In contrast to the average peak demand of around 150.5 gigawatt (gw) in the earlier part of this month, the peak demand in the country came down to 137 gw on October 20, a day after Diwali, which was the lowest in the month.

The impact of this reduced demand was visible on the spot market, where the buy bids reduced to 113.6 million units (MU) and were outstripped by the sell bids of 208.9 MUs on the same day.

As a result of the depressed demand and relatively more supply, the prices in some of the time blocks fell to as low as Rs 1.94 per unit on October 20 and the average price of Rs 2.88 per unit was the lowest in the whole month.

The spot electricity prices on the power exchanges are a function of the demand and supply available at the platform at a given time. Although the volumes traded on the power exchanges represent only about 3.5% of the total electricity generated, the prices in the spot market trace the larger demand-supply scenario prevailing in the country.

The final cleared volume also dipped to 103.32 MU, which was otherwise trending around 146 MUs on average in the month of October on the days preceding Diwali. The reduced demand can be attributed to the onset of winter and fall in temperatures in the northern region.

An analyst with a brokerage house said low supply combined with high demand from distribution companies was also one of the key reasons for the high prices experienced in the spot market in the weeks prior to Diwali.

"The supply has been subdued in the months of August, September and early October 2017 owing to the coal shortages being faced by the thermal generators, reduced hydro and wind generation in the country,'' the analyst said.

The analyst stated that on October 6, the average clearing price in the spot market was the highest and touched Rs 5.61 per unit. The peak shortage in the country was also towering at 6,212 megawatt on the same day due to depressed demand and relatively more supply. The difference between the sell and buy bids at the exchange on the day was also huge, with buy bids of 238.6 MU at about 1.7 times the sell bids of 137.3 MU.