Power Demand Slashed Due to Monsoon: Exchange Recorded Price Fall

The arrival of the monsoon season has brought much-needed respite to India’s power grid, leading to a significant drop in electricity prices. This welcome relief follows a period of intense heat waves that pushed power demand to record highs, straining the system.

Impact of Monsoon Rains

• Demand Reduction: As monsoon rains swept across the northern region, particularly hard-hit by the heatwave, electricity demand saw a substantial decline.
• Price Drop: Between June 27th, when the rains began in earnest, and July 7th, the average power price on the Indian Energy Exchange (IEX) Day-Ahead Market (DAM) witnessed a significant drop of 22% compared to the period between June 1st and June 27th. This translates to an average price of ₹4.3 per unit during the rainy period.
• Peak Power Reduction: The peak power demand on July 8th stood at 210.5 GW, a significant decrease compared to the peaks of 216-230 GW witnessed just two weeks prior. Notably, the highest-ever peak power demand of 250 GW was recorded on May 30th.
• Favorable Forecast: The Indian Meteorological Department (IMD) predicts above-normal rainfall across the country throughout the monsoon season, lasting from June to September. This optimistic forecast bodes well for maintaining lower power demand and potentially even more favourable pricing in the coming months.

Market Response

• Round-the-Clock Prices: Reflecting the lower demand, the average round-the-clock price on the IEX fell by 21% between June 27th and July 7th, dropping from an average of ₹4.34 per unit in the previous period to ₹3.43.
• Solar Power Benefit: Electricity prices during the daytime, when solar power generation is at its peak, witnessed an even sharper decline. The average price for daytime power dropped to ₹2.41 per unit during the rainy period, compared to ₹3.19 earlier.
• Increased Trading: Despite lower prices, the volume of electricity traded on the IEX actually increased. Between June 27th and July 7th, the average daily volume stood at 182.4 million units, a significant increase compared to the 130 million units traded daily a year ago. This suggests that despite lower prices, overall power generation and consumption may be on the rise.

Overall, the arrival of the monsoon has brought a much-needed period of stability to India’s power sector. Lower demand and increased rainfall have led to a substantial drop in electricity prices, providing relief to consumers and businesses alike.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.