Loading...

Sharp rise in peak power deficit


14 March 2022 | BRIDGE TO INDIA

Sharp rise in peak power deficit

It is early March and peak power demand this month has already hit 195 GW as against 186 GW last year. Peak demand over last five years has grown at a CAGR of 4.6% outpacing total power demand CAGR of 3.4%.

Figure 1: Peak and total power demand

Source: CEA, BRIDGE TO INDIA research

These are official peak demand numbers reported by CEA, which also reports a rising peak deficit of 2.9 GW in the current financial year as against a deficit of about 1.4 GW in the last 3-4 years. Actual peak deficit is almost certainly much higher as DISCOMs routinely resort to load-shedding in response to rising demand. Increasing peak demand has led to greater volatility in hourly prices in the day-ahead-market on the exchanges. Morning and evening peak power prices are now routinely hitting and crossing INR 8/ kWh as shown in the following chart. Indeed, the day-ahead prices touched a new high of INR 20/ kWh on 4 March 2022.

Figure 2: Average hourly prices in the day-ahead market, INR/ kWh

Source: Indian Energy Exchange, BRIDGE TO INDIA research

There has been a similar increase in round-the-clock (RTC) prices on the exchanges over last 5 years. RTC prices in first week of March 2022 touched INR 5.41/ kWh against INR 4.07 and 2.46 seen one and two years earlier respectively.

There are several factors explaining demand-supply imbalance and price spikes. Growth of renewable capacity, concomitant with the sharp slowdown in thermal capacity addition over the last few years, is the biggest factor at play. Surplus power available for sale on the exchanges has almost completely dried up. Imported coal prices have shot up to over USD 100/ ton, an increase of over 2x in the last year, rendering affected plants unviable. And domestic coal production capacity does not seem fully geared up yet to cater to 100% demand.

The deficit is expected to get worse in the next few months as we hit peak summer. And prognosis for the next few years does not look good. A simple extrapolation of demand-supply suggests that peak deficit could reach 30-40 GW levels in the next five years. Expected renewable power capacity addition of around 60 GW, almost all without any storage capacity in the same period, would exacerbate peak power deficit and price volatility.

There are already some calls for developing new thermal power projects to ease supply pressure. The government would do well to resist such pressure and examine alternate remedial measures like incentivising addition of storage capacity, demand side management and move to market based pricing of power. Meanwhile, soaring peak power prices should provide sufficient financial reasons to DISCOMs to overcome their financial concerns and commit to RTC renewable power. It is worth noting that SECI’s first peak power tender (1,200 MW solar-wind-storage hybrid capacity, peak power price of INR 6.12-6.85/ kWh) is still not fully contracted, more than 2 years after the auction date.


Recent reports

India PV Module Intelligence Brief | Q1 2023

India PV Module Intelligence Brief | Q1 2023

This report captures quarterly trends in module demand and supply, import and domestic production volumes, supplier market shares, break-up by technology and rating, pricing trends across the value chain, key international developments and short-term market outlook.

India Corporate Renewable Brief | Q1 2023

India Corporate Renewable Brief | Q1 2023

This report provides an update on key trends and developments in the corporate renewable market including capacity addition, key players, policy issuances, financing, equipment prices and other market trends.

India Solar Compass | Q1 2023

India Solar Compass | Q1 2023

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tenders and policy announcements, equipment prices, financial deals and other market developments. It also provides market outlook for the next two quarters.

Facilitating Growth of Corporate Renewable Market

Facilitating Growth of Corporate Renewable Market

India’s corporate renewable market is benefitting from strong growth drivers in the form of rising RPO target, ambitious decarbonisation agenda and attractive cost saving potential. But while corporates account for 50% of total power consumption in the country, their direct procurement accounts for only 27% share of renewable power capacity. Figure: Total renewable power capacity split by...

India Residential Rooftop Solar Market 2023

India Residential Rooftop Solar Market 2023

India’s residential rooftop solar market, long held back by low consumer awareness and poor economic viability, is showing encouraging signs of growth. With less than 1% of urban households having adopted residential rooftop solar so far, the market represents huge growth potential.

Pumped storage projects – a bright future

Pumped storage projects – a bright future

Large scale deployment of intermittent renewable power requires storage solutions to address imbalances between supply and demand, and more ancillary services. Battery energy storage systems (BESS) are gaining popularity worldwide but their near-term deployment potential in India is limited by several challenges.

To top