On Thursday, the total electricity that was offered for sale on the IEX, the country's largest power exchange, was well over three times the volume that utilities offered to buy.As a result, the minimum price on the exchange dipped to just 89 paise a unit, while the weighted average price of power for the entire day was only Rs 1.62 a unit. On PXIL, the second operational bourse, the sell volume was over 16 times what buyers bid for the day.
A combination of extended monsoons and new merchant capacity coming on stream has led to a crash in the electricity spot market, with availability well in excess of demand, and prices in the day-ahead market on the bourses down to record lows since August. Improved hydel generation has also added to the availability.
Reflecting this, on the IEX, the weighted average Market Clearing Price plummeted from over Rs 4 a unit in August to around Rs 2.5 a unit range in the first week of September. Since September 11, the weighted average price has been consistently below Rs 2 a unit, in line with the lopsided supply-demand equation.
On Thursday, purchase bids were submitted by distribution utilities for 28 million units, while sale bids were received for 81 million units. On PXIL, purchase bids came in for 1.45 MUs while sale bids were received for 17.29 MUs.
"This year, the day-ahead Exchange prices have fallen sharply compared with last year mainly as a result of new capacity addition particularly by private players - a trend likely to continue considering the private capacity already under construction," a Central Electricity Authority (CEA) official said.
The quotes received for Friday on the day-ahead market on the IEX is a repeat of Thursday's story, with purchase bids for 29 MUs against sale bids for over 93 MUs. The average price is pegged at Rs 1.62 a unit for the day and minimum tariffs are down to 79 paise a unit.
Of the total electricity generated, roughly 8 per cent is transacted in the short-term market. Of this, around half is through bilateral deals (via traders and directly between distribution companies), while the remaining is through the power exchanges (IEX and PXIL) and the UI mechanism (the grid-frequency linked price-balancing mechanism).
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