Rains help reduce power prices as temperatures and demand plunge

Power shortages in India eased significantly due to sudden rains, and rationed coal supplies.

 Rains help reduce power prices as temperatures and demand plunge

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• The story: Widespread and sudden rains in October, dampening electricity demand, and operationalisation of more imported coal-based generation units by Tata Power led to decline in average spot power prices by nearly three-fourths. That was a signal of relief from the coal crisis in India.
• Prices crash: The average spot prices on the exchange were Rs 14 per unit in October third week, which crashed to Rs 9.67 a unit, as demand eased due to dipping evening temperatures and the extended weekend.

1. The total coal stock at power houses rose to 7.5 million tonnes from 7.28 million tonnes on October 9
2. More than 3,500 MW power was surplus in various time blocks on the day-ahead market of Indian Energy Exchange
3. Most states, except Rajasthan, reported no outages but all of them said the situation remained critical.

• Coal supply gave hope: Power developers with projects in several parts of the country received continuous but rationed coal supply. October 15 showed four days' average coal stock at 165 GW- monitored power capacity, of which 89 GW had less than four days of stock.
• Feedback from states: Rains across various parts of north, northwest and southern India have led to a dip in temperatures, reducing electricity demand. For example, Punjab saw electricity demand reduced to 6,000 MW on Sunday from 9,000 MW on average due to the rains.
• Weather report: The Met department informed that an intense spell of rainfall over northwest India was likely to continue, and also over east and northeast India. Department said rainfall over southern Kerala, Karnataka, Tamil Nadu and Puducherry would reduce. All states expect to reduce their dependence on spot power markets in the coming days, as demand weakens amid cooler weather and coal supplies to power plants get restored.
• Coal supply update: Curtailment of supplies from Coal India subsidiaries continued to non-power consumers, including aluminium, paper and cement companies. The coal ministry had asked Coal India to regulate supply to non-power units until the average stock at power plants improves. The restrictions would ease in the next 10-12 days, by when average inventory at power stations is expected to reach a comfortable level of six-seven days. Coal India has suspended spot coal auctions to the non-power category to prioritise the replenishment of inventory at power stations.
• EXAM QUESTIONS: (1) What are the links between weather, coal supply, power demand and spot prices? Explain. (2) In what ways can the coal industry in India improve the power situation? (3) How did private power producers benefit from the October power crisis in India? Explain.

Read more on - Polity | Economy | Schemes | S&T | Environment

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