Electricity prices in India, which witnessed a robust 8.5 per cent y-o-y growth in power demand in H1 2024, fell 10 per cent y-o-y in first half of 2024 despite an unprecedented surge in demand due to record heat waves, the International Energy Agency (IEA) said on Friday.
“In India, electricity prices saw a 10 per cent y-o-y decline during the first half of 2024. Proactive measures taken by the government and regulators, including the sale of surplus requisitioned electricity on power exchanges, increased fuel supply and ensured higher availability of generating units, creating greater liquidity on the exchanges, which put downward pressure on prices,” the IEA said.
However, prices remained 40 per cent above the 2019 average, supported by surging electricity demand driven by economic growth and rising cooling needs, it added.
Stable prices
The development assumes significance as India was the only market that did not post a “substantial” drop in electricity prices in 2023, the IEA had said in its last electricity report released in February this year.
In 2023, prices fell 4 per cent to ₹5,540 per megawatt hour (MWh), or ₹5.50 per unit, but were almost double those in 2019. The tight supply situation due to strong demand growth kept prices elevated, the agency had said.
According to data from the Indian Energy Exchange (IEX), India’s largest power exchange, the average market clearing price in its most traded Day Ahead Market (DAM) segment was ₹5.51 per unit in 2023.
However, in the current calendar year, power exchange prices have been relatively stable and have even declined during Q1 2024.
According to IEX data, DAM prices on the exchange fell from ₹6.08 a unit in Q4 FY23 to ₹4.89 in Q4 FY24, a decline of 20 per cent y-o-y.
Similarly, the market clearing price in DAM during Q1FY25 was largely flat at around ₹5.27 per unit (₹5.17 per unit in Q1 FY24).
Rising power demand
In India, following robust growth of over 8 per cent (y-o-y) in 2023, the strong economy, expanding industrial activity and intense heat waves combined to boost electricity demand growth by 8.5 per cent y-o-y in the first half of 2024, the IEA pointed out.
“We expect this higher trend to continue for the remainder of the year, with annual growth averaging 8.2 per cent in 2024, before easing moderately to 6.8 per cent in 2025 in line with the GDP projections, and assuming normal weather conditions,” it added.
In India, the IEA pointed out that drought conditions which emerged in 2023 following the onset of El Niño continued to have an impact in 2024, resulting in an 8 per cent y-o-y decline in electricity generation from hydropower in the first half of 2024. As a result, amid strong electricity demand growth, coal-fired generation was up 10 per cent in H1 2024.
Gas-fired output rose 50 per cent y-o-y during the same period. This increase follows an emergency clause invoked by the government mandating companies to operate underutilised gas-fired power plants by importing fuel, it added.
At the same time, the mandate for imported coal-based power plants to operate at full capacity was extended until October 15, 2024, due to expected high demand during the peak summer period. As a result, IEA expects coal-fired generation in India to remain robust, growing by 7 per cent on average for the full year.
“Over the same period, we expect solar PV generation to increase by 32 per cent and wind by 4 per cent, followed in 2025 by over 20 per cent growth in solar PV generation and 3 per cent in wind. As renewable output grows, we expect coal-fired generation to record a limited increase of around 2 per cent in 2025, assuming normal weather conditions,” it said.