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Compared to the record-breaking peak demand of 243 GW that strained India’s electricity grid in September last year, healthy rainfall this time around has eased agricultural demand and boosted hydro generation by a whopping 24 per cent. With more rains forecast for the coming days and kharif season expected to end soon, grid operators and base load generating units like coal-fired plants likely face a more manageable situation this September.
In a trend that appears to be continuing from August, when year-on-year (y-o-y) power demand fell for the first time in 15 months, 41.2 billion units (BU) of electricity was supplied in the first nine days of September, down 7 per cent y-o-y from 44.5 BU. Similarly, peak demand during the same period fell by 12 per cent to 209 GW.
“Last time, the base was extremely high because of a drought-like situation in the country. This time, it is exceptionally good. We have not seen this kind of rain in the last 10 years,” Rohit Bajaj, Joint Managing Director of Indian Energy Exchange (IEX) Ltd said.
Typically in August and September, agricultural demand is very high as farmers rely on pump sets to extract ground water. When rainfall is good, the need to operate pump sets falls drastically.
With healthy rainfall and reservoir levels also going up, hydro generation in the first nine days of September surged by 24 per cent to 7.2 BU compared to 5.8 BU last year. Significantly, hydro generation has picked up in September compared to previous months.
“If you look at last year, hydro generation was down 17 per cent because of water availability issues and also because a lot of projects got impacted by floods in the northeast part of the country and even in Himachal Pradesh. This year too, at least till August, it has been largely flat,” Vikram Reddy V, a senior executive at ICRA, said.
With demand falling in recent weeks and renewable generation also soaring, coal-fired generation has taken a backseat. In August, it fell by 3 per cent y-o-y. Notably, the share of hydro, wind, and solar generation in September so far jumped to 32 per cent compared to 25 per cent last year.
Market clearing prices on IEX have also fallen. “We have seen so many days with prices less than around Rs 3. This is a great opportunity for distribution companies to buy cheaper power and replace their cost rate generation,” Bajaj said.
For FY25, Reddy V expects overall demand to increase by 6-6.5 per cent. “Till July, annual demand growth was close to 10 per cent. In August, it would have come down to 6-7 per cent. I think this base effect will go away after October and demand should be picking up from November onwards. In fact, even the GDP growth is expected to be higher in the second half of the year,” he said.
“Peak power demand is estimated to have declined to 217 GW in August compared with 238 GW a year earlier, which was the second-highest level recorded in fiscal 2024. Similarly, weighted average market clearing price in the real time market declined ~45% on-year to Rs 3.3 per unit in August 2024 from Rs 6.0 per unit a year earlier. Demand moderated across India, with the western and northern regions experiencing on-year declines of ~10% and ~6%, respectively,” a report by CRISIL said.
