Power Prices on Indian Exchanges Decline Amidst Increased Supply and Moderate Demand
Power prices in both the Day-Ahead Market (DAM) and Real-Time Market (RTM) have decreased compared to the previous year, driven by a surge in electricity supply coinciding with subdued demand. Heavy monsoon rains and cooler temperatures are key factors contributing to this trend.
Data from the Indian Energy Exchange (IEX) indicates that the market clearing price (MCP) in the DAM, where the majority of exchange trading occurs, was ₹4.17 per unit as of August 22nd, a decrease of 11% from ₹4.68 during the same period last year. The RTM price also saw a decline, falling 6% to ₹3.57 per unit.
Experts attribute the price reduction primarily to a meaningful increase in sell bids – the amount of power offered for sale – on the exchange. Sell bids in the DAM rose by 51% in August, reaching 10,378.37 GWh (gigawatt hours), compared to 6,865.90 GWh in August of the previous year.
Rohit Bajaj, Joint Managing Director at the IEX, stated that the lower prices present an prospect for distribution companies and commercial & industrial (C&I) consumers to procure power at competitive rates, potentially replacing more expensive sources with exchange-traded electricity.
Increased hydropower generation, spurred by the robust monsoon season, and a boost in solar power capacity are contributing to the increased supply. Mint previously reported on August 20th that hydropower generation is projected to increase by approximately 10% in FY26 due to the strong monsoon.
Demand on the exchanges has not kept pace with supply, further impacting prices.Purchase bids in August totaled 6,041.02 GWh, significantly lower than the exceeding 10,000 GWh of sell bids.
Peak power demand this summer reached 241 GW, lower than the projected 270 GW for the year. India’s highest peak demand recorded to date was 250 GW in May 2024.
Power demand in India decreased by 1.5% during April-June,primarily due to reduced usage of cooling appliances following the early arrival of the monsoon. total demand during this period was 445.8 billion kilowatt-hours, according to data from the Central Electricity Authority.
While overall power demand was weaker through July compared to the previous year, August has shown signs of recovery. Vikram V., Vice-President and Co-Group Head of Corporate Ratings at ICRA Ltd, noted that power demand fell by 0.5% year-on-year during April-July, but July saw some improvement and August has demonstrated positive growth. He anticipates that demand growth could improve through October, benefiting from a favorable base affect, unlike last year when demand dipped during August-October.
As of the start of the southwest monsoon season in June, the country has received 632.7 mm of rainfall, 2% above the normal level of 619.8 mm for the period.