Short-term power market sees high-voltage action

At over Rs 17,600 crore in March 2010, the short-term power market in the country, involving transactions through power traders and deals on the power exchanges, has grown over seven-fold during the last five years.

Amid the spectacular growth, power major NTPC Ltd plans to join the party, where private players such as the Naveen Jindal Group, Videocon and the Adanis are already strong contenders.

The size of the overall short-term electricity market, involving contracts spanning less than a one-year period, would be much larger at close to Rs 20,000 crore if direct bilateral sale between distribution companies and transactions through the UI mechanism (the grid-frequency linked price-balancing mechanism) were to be taken into account.

For players in the sector, short-term market deals are proving to be lucrative, with tariffs hovering between Rs 5.50 and Rs 7.60/unit for the past two years in bilateral trade and trade through exchanges.

“The merchant power business, which is risky by virtue of power not being tied-up upfront, offers lucrative returns in light of the electricity shortages across the country,” an industry player said.

Of the total electricity generated in India in 2009, the short-term power market comprised only 8 per cent. The balance 92 per cent of generation is being procured mainly by distribution companies through long-term contracts.

Highest tariffs

While the short-term power market has been growing, in 2009-10, it not only grew in absolute volume terms, but its share as a percentage of total electricity generation in the country also shot up noticeably.On the pricing front, the year witnessed the highest ever tariffs for electricity transacted through power exchanges and trading licencees, especially in the months of April and August 2009.

In volume terms (kWh) the size of the short-term market in India, excluding UI and direct bilateral sale between distribution companies, was about 30.6 billion kWh (units) in the year 2009.

Volume rises

As compared to the volume of electricity transacted through the short-term market in 2008, this was about 20.3 per cent higher.In monetary terms, the size of the (30.6 billion units) total short-term market was about Rs 19,217 crore in the year 2009.About Rs 3,320 crore of which was the value of electricity transacted through power exchanges, and the balance of about Rs 15,897 crore was the value of electricity traded through trading licensees.