Spot prices on power exchanges witnessed record highs in 2022 due to high demand for power amid low coal supplies at generating stations

The average market clearing price in the day ahead market on the Indian Energy Exchange fell 33 per cent month-on-month to ₹6.76 a unit in May 2022 as renewable energy came to the rescue cooling down spot prices that rose to record high in April.

“Owing to the various timely measures undertaken by the government to address supply side constraints and increased renewable (up 44 per cent y-o-y) and hydro power generation (8 per cent y-o-y), the day ahead market (DAM) on the exchange saw significant correction in pricesfrom ₹10.06 per unit in April to ₹6.76 per unit in May 2022,” IEX said in its power market update for May.

For perspective, the average market clearing price in the real time market and DAM skyrocketed by almost 200 per cent between January and April 2022 to ₹10.06 per unit and ₹9.56 a unit, respectively. High spot prices are reflective of the growing power demand amid low coal supplies forcing States to buy electricity at high rates. For FY22, the average MCP stood at around ₹4.4 a unit, which is the highest in the last 10 years.

Experts attribute the price surge to idle imported coal-based and gas-based power plants due to high global prices of the two commodities. Besides, with ICB plants dependent on domestic coal, the supply lines were stretched further increasing pressure on plants to secure coal. DAM and RTM account for a majority of the trade on IEX.

In its market bulletin, IEX said that during April, the power supply side constraints reflected across market segments. In DAM and TAM combined, the total buy bids at 21,996 million units (MU) were almost thrice sell bids at 7,010 MU, while the cleared volume was at 5,818 MU. This situation also led to an increase in the price of power at IEX, both in the conventional as well as green markets.

Energy consumption in April 2022 grew 11 per cent Y-o-Y to 133 billion units (BU). The national peak demand met during the day was at an all time high of 207.11 gigawatts (GW), up 13 per cent on an annual basis.

RE helps cool prices

IEX Green Market comprising GDAM and GTAM segments achieved 642 MU volume during May seeing an 80 per cent y-o-y growth. The GDAM achieved 493 MU volume with weighted average price of ₹5.91 per unit and saw 172 participants.

The GTAM achieved 148 MU and recorded a high of 23 market participants on May 4. The average monthly price for solar was ₹6.41 per unit while the average monthly price for Non-Solar was ₹8.21 per unit.

Key distribution utilities from Delhi, Haryana, Telangana, Karnataka, Maharashtra, Punjab, Daman & Diu, Gujarat and Uttar Pradesh, as well as several industrial consumers participated in IEX’s Green Market during the month, the exchange said.

Growing RE generation

India’s renewable energy generation has been steadily increasing aided by the government’s push to clean energy transition. Total RE generation during May rose 33 per cent y-o-y to 19,306.47 MU. So far in FY23, India’s RE generation rose by 32 per cent y-o-y to 34,413.29 MU.

Solar power generation grew 70 per cent on an annual basis to hit 9,764.26 MU in May, while wind power generation was up 23 per cent y-o-y to 8,104.78 MU.

Published on June 07, 2022