The demand growth would mark a decadal high rate of growth and almost double the 20-year average of 5.2 per cent, the report added.
The report noted that demand growth weighed in at 7.7 per cent in February and averaged 10 per cent for the 11 months of the current fiscal despite a high base of fiscal 2022 due to extreme weather events and robust industrial and manufacturing activity.
March is unlikely to see any let up amid early warnings on possible heat waves in northern and central regions this summer, the report said.
According to Hetal Gandhi, a director with the agency, a hotter-than-usual summer with a high probability of multiple heat waves is expected to keep power demand growing even next fiscal at 5.5-6 per cent, despite two straight years of robust growth. The first half should see even higher growth.
On generation, non-hydro renewable sources are estimated to account for 11 per cent this fiscal and their share is expected to rise a notch next fiscal, with solar and wind accounting for 13 per cent. Hydro power accounts for another 11 per cent now.
But with limited storage capacities, thermal capacities will continue to shoulder the burden of meeting any sudden surge in demand, especially in the summer when water levels in hydro projects drop. In fact, the share of hydro dropped to 8 per cent last summer from average 11 per cent for the full year. Meanwhile, power plants using imported coal, aggregating to 17 GW, or 8 per cent of the total thermal capacity, were operating at a low plant load factor of 21 per cent as of February, massively down the aggregate thermal plant load factor of 63 per cent. And nearly 97 per cent of these imported capacities are owned by private players, she said, adding, as a result, short-term power prices have surged.
To tame the prices, the power ministry has floated a tender to buy 1.5 GW from plants using imported coal with untied capacity for one month (April 10-May 10).
Though there is 8-GW overall untied thermal capacity available, the share of imported coal based plants without short and medium term power purchase agreements in this untied capacity remains a monitorable.
According to Surbhi Kaushal, an associate director at the agency, the government aims to pump this entire 1.5 GW to the short-term market at no cost to tame prices.
Imported coal plants will bid on fixed tariff with an upside of price on variable charge indexed at Rs 5.34/kWh. This implies a 20 per cent mark-up on variable charge of Rs 4.4 at an estimated Rs 7,500 per tonne imported coal prices for Q1FY24.
The move is in addition to the government’s move to invoke Section 11 of the Electricity Act, mandating all plants using imported coal to operate at full capacity, enabling better supply position.
Coal stocks remain at 12 days with the plants, compared to 14 days over the past 35 months, and all wheels are focusing on getting coal supplies on stream. Structural steps such as fast-tracking coal-based rail transportation projects are also being expedited.
However, short-term markets have reacted. A surge in demand has led to purchase bids surpassing the sell bids in the short-term market by 6 GW on average in the past 15 days. The result is a 42 per cent on-year increase in prices in February and a 151 per cent increase on the first day of March.
The market clearing price in the day-ahead market (DAM) on the Indian Energy Exchange breached Rs 6.5/kWh in February, which is the highest level seen in the past eight months.
In 2022, the purchase-sell bid differential started turning positive in the first week of March, averaging over 3.5 GW. High prices forced the Central Electricity Regulatory Commission to intervene and reduce the price upper limit from Rs 20/kWh to Rs 12/kWh in April. Despite this, positive differential averaged over 10 GW in April-May 2022, pushing up prices to Rs 10/kWh on average over the period.
Crisil expects DAM prices to average Rs 6-6.5/kWh this fiscal, compared to average of Rs 3.1//kWh in fiscals 2015-19. Average price for next year in DAM market is expected to remain under Rs 7-8/kWh, with almost non-operational gas-based power generation of 24 GW to become competitive with falling gas prices.