Recent uptick in spot energy tariff is unlikely to be sustained, amidst available surplus thermal capacity: ICRA

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New Delhi: The average spot power tariff on the Indian Energy Exchange (IEX) has recently witnessed an increase, the same were Rs. 3.12/kwh in August 2017 and Rs. 4.11/kwh in September 2017 (till 14th September) respectively; representing an increase of 44% and 69% on year-on-year (Y-o-Y) basis, with an one-off high of as much as Rs. 9.9/kwh witnessed in one time interval of 15 min time block on 13th September 2017.

Says Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings, “The current increase in spot prices has been driven by a demand uptick with 5.4% growth in April-August 2017. This growth was largely supported by a better demand in few states like Uttar Pradesh (15.5%), Telangana (12.3%), Maharashtra (9.5%), Andhra Pradesh (7.0%) and Karnataka (5.8%). However, in ICRA’s opinion the spike in spot tariff is likely to be temporary and unlikely to be sustained given the still moderate demand, albeit encouraging, growth and surplus thermal capacity available to meet energy demand.”

Better energy demand coupled with the reduction in hydro and nuclear based generation in FY2018 (till August) has led to an improvement in all India thermal PLF, which has increased to 58.0% in August 2017 as against the reported PLF of 54.4% in July 2017, and significantly higher than the PLF of 51.9% seen in August 2016. However, the sustenance of this improvement in thermal PLF is dependent upon the recovery in all India energy demand which is function of a) demand growth from industrial segment and b) extent of an improvement in off-take capacity of distribution utilities, post implementation of UDAY scheme.