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India prepares for scorching summer as power prices surge on exchanges

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In Short:

Power prices on exchanges have increased due to rising temperatures and demand. Market cleared price rose to ₹4.6 per unit on 2 April from ₹3.5 a week ago, hitting ₹5.21 on 1 April. Energy demand rose by 10.8% from last month. Peak power demand could reach 260 GW this summer. Government is taking steps to ensure uninterrupted power supply, like directing coal-based plants to operate at full capacity.

New Delhi: Prices of power on the exchanges have shot up recently as the temperatures rise and power demand increases.

Price Surge

On 2 April, the market clearing price (MCP) of power in the day ahead market (DAM) segment of the Indian Energy Exchange rose to ₹4.6 per unit, up from ₹3.5 per unit a week ago. Just a month back, the price stood at ₹3.6 per unit, reaching a high of ₹5.21 per unit on 1 April, the highest in 30 days.

Increasing Demand

According to data from the Grid Controller of India, energy demand soared to 4,722 million units on 2 April, marking a 10.8% increase over the consumption a month ago. Last year on the same date, energy demand was at 3,874 million units. Predictions indicate that the demand will continue to rise this month, potentially leading to even higher exchange prices.

Expert Insights

“Unseasonal rains in April 2023 kept the temperatures low, resulting in subdued power demand. However, with a favorable base and rising temperatures expected this April, we anticipate double-digit growth in demand,” stated Vikram V, vice-president & co-group head, corporate ratings at ICRA.

He also mentioned that while hydro generation has decreased, the sufficient coal stock should help meet the escalating demand.

Summer Power Projections

This summer, peak power demand is projected to reach 260 GW, surpassing last year’s record of 243 GW. As of 2 April, India’s peak power demand stood at 209.49 GW. The Indian Meteorological Department (IMD) forecasts higher-than-normal temperatures across the country, except in isolated areas.

Government Measures

With concerns about record power demand in the upcoming summer, the government has introduced several initiatives to ensure uninterrupted power supply. The power ministry plans to instruct power plants using imported coal to run at full capacity until September, extending the current mandate until June. There is also a possibility of imposing a similar mandate for gas-based power plants.

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