The country’s power distribution entities (Discoms) are weighing the Day Ahead Market (DAM) for affordable procurement of power on apprehensions of prices rising on the back of increased demand for electricity during peak summer months.
“Considering the expected surge in electricity demand, many discoms entered into forward contracts through DEEP (Discovery of Efficient Electricity Price) portal and monthly contracts on power exchanges,” said a power industry source who did not wish to be identified. “And in the majority of the cases, they (discoms) secured power at higher prices.”
Prices on the DAM segment at the Indian Energy Exchange during March and April so far have remained range-bound. According to the official data from the exchange, DAM average market clearing price for March stood at Rs 3.91 per unit, down by 28% from last year. In April, the average price discovered so far is around Rs 5 per unit for DAM whereas it is Rs 4.6 per unit for the Real Time Market (RTM).
Average traded price of monthly contracts in the bilateral segment on the government’s DEEP portal, however, averaged at Rs 8 per unit during the period.
“The differential between the DAM prices and bilateral prices of almost around Rs 5 per unit provides a great opportunity for discoms to leverage DAM and reduce their power procurement costs substantially as compared to other sources of procurement,” said an industry source.
DEEP portal is a platform for procurement of short-term power by discoms through bilateral contracts. Contracts for about 50 billion units (BUs) are traded on the portal, posing competition to the long duration contracts offered by the three power exchanges.
The industry projects the lower electricity prices to sustain for the near to short-term period presenting an opportunity for distribution companies and industrial consumers to optimize their power procurement costs at times of high demand and prices.
The government forecast a 7-8% growth in the country’s energy consumption from last year during summer. To ensure availability of electricity and be able to meet the summer power demand projected at 260 GW, the power ministry has taken several measures including the extension of Section 11 of the Electricity Act, 2003 till September, guiding all imported coal based power plants to operate and generate power to their full capacity and expedition of new capacities. In line with this, the coal ministry has also stepped up its efforts with increased coal production by public sector undertakings in order to ensure adequate supply of coal to thermal power plants.
In FY24, the peak demand met grew by 13.9% from 210.7 GW the previous fiscal year to 239.9 GW. Relative to FY23, the energy requirement grew by 7.5% in the last financial year and the energy availability grew by 7.8%, resulting in a reduction in total energy shortfall from 0.5% in 2022-23 to 0.2% in 2023-24, according to government data.
Source: The Financial Express