Drop in spot power purchase rates helps State discoms, utilities

The drop in electricity purchase rates in the spot market through energy exchanges is helping some State utilities and distribution companies meet their power requirement during the coronavirus lockdown situation.

Prabhajit Kumar Sarkar, MD & CEO, Power Exchange India Ltd (PXIL), said “they (discoms) are able to purchase power at the lower rates ruling now and supply during this troubled times and lockdown period.”

In a detailed conversation with BusinessLine , Sarkar said: “the discoms are able to buy power at lower prices ruling at the exchanges due to slackened demand and a fair price discovery. And some of the States are also sellers on the exchanges.”

Reduced demand

The all-India demand data related to spot market prices shows the average price between March 15-April 10, 2020 has gone down to ₹2.40 per kwh versus ₹3.18 per kwh in 2019. This price drop has attracted some of the State utilities to up their purchases.

Referring to the Union Power Ministry’s move to extend certain facilities to discoms, he hoped that a part of the trade they take up will be mandated on the energy exchanges, which will enable in right price discovery.

Earlier, Sarkar said: “With Central and State governments issuing directives for closure of all non-essential workplaces — offices, commercial establishments, and industrial units except units serving the essential services, the demand for electricity from such consumers has reduced over the past fortnight.”

The demand today is due to household consumption, critical healthcare facilities, municipal services in cities and towns, cold storage and warehousing services, among other key areas for seamless essential services to all the people of the country.

Though reduction in commercial and industrial demand is reflected in the reduced power demand, the power supply has continued to be available as central sector generators, State-owned power plants and independent power producers (IPPs) are available and renewable energy (RE) generators have been given a must-run status.

24x7 trading

Explaining this in the context of current scenario, Sarkar said: “with lower demand and continued supply, the prices in the market have certainly come down significantly. In the prevailing scenario, distribution companies can meet their power purchase requirement on a daily/weekly basis by accessing PXIL’s trading platform to provide 24x7 supply to their consumers during this critical juncture, including supply to critical healthcare facilities, disaster management, telecom and internet services, banks, cold storage and warehousing services, public utilities like water, sewerage, street lighting, etc.”

Referring to PXIL’s move to a web-based transaction model through its trading platform, which happened in January, Sarkar said this allows customers to trade 24x7 on all days of the year.

During the ongoing lockdown, this platform has helped address the challenging task of people having to work from home. The entire process is automated and seamless and there is no human interface. This has helped various participants to actively trade as demonstrated during the renewable energy certificate trading as a part of the renewable purchase obligation.

Admitting that while the demand was muted, he said, “yet companies across the country still participated using PXIL’s 24x7 web-enabled platform from various locations.”