December 30, 2017

Coal supply surge pulls down spot power prices

Spot power prices have declined to about Rs 2.90 per unit from a high of Rs 5 per unit in early September as near-adequate availability of coal led to higher electricity generation. Analysts said prices may fall further and stabilise at about Rs 2.5 per unit.

Improved coal supplies and reduced power demand in winter boosted inventory levels of the fuel at power plants. Coal stocks at plants are close to 13 million tonnes, enough to last for nine days now compared with six days in September-October.

With higher electricity generation by plants, demand for short-term power on the exchanges in November and December declined from the previous months. Short-term power prices fell to Rs 3.55 per unit in November and further to Rs 2.9 per unit on Thursday.

The difference between total buy and sell bids at the Indian Energy Exchange turned negative in November and for most of December, indicating a drop in demand for short-term power. On most days in December, half the power on offer remained unsold either due to lack of demand or constraints in the power grids, pulling down prices to below Rs 3.

Power generators offered almost 6.4 million units for sale over the past 30 days, of which only about 3.9 million units were sold.

“Power generation in November, excluding renewable resources, increased 1.7% yearon-year to 95 billion units,” said Nitin Bansal, an analyst at India Ratings and Research. “However, demand in November dipped 8.2% against October due to seasonal variation and drop in temperature across northern India. These factors are likely to pull down power prices at exchanges further over the next three months. We believe it would stabilise at around Rs 2.5 per unit and Rs 2.6 per unit during the next three months.”

During this time, Coal India increased production 2.6% year-on-year. Production has been rising year-onyear since August. Coal inventory levels have improved over the past few weeks on account of increased production and lower requirements due to easing power demand in November.


Subscribe to Newsletter