Continued decline in all-India power demand affecting thermal PLFs


India Ratings and Research (Ind-Ra) has published the May 2020 edition of its credit news digest on India’s power sector. The report highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions by Ind-Ra.

In May 2020, the all-India energy demand decreased 14.9% yoy to 102.7 billion units, while energy supply also decreased 14.9% yoy, resulting in the energy deficit remaining at 0.5% (May 2019: 0.4%). The power demand declined for May 2020, amid the COVID-19 led lockdown on account of a decline in commercial and industrial demand from major manufacturing states such as Maharashtra (down 11.3%), Gujarat (down 13.5%) and Tamil Nadu (down 15.1%). The decline in power demand narrowed in May 2020 (down 14.9%; April 2020: down 22.3%) due to the gradual lifting of lockdown for certain economic activities, increase in domestic consumption with the peak summer season and increase in agricultural usage due to the onset of sowing season.

With the decrease in demand, electricity generation (excluding renewables) also decreased 17.7% yoy to 96.3 billion units in May 2020 (April 2020: down 25.4%) with thermal generation declining 21.4% yoy (April 2020: down 28.5%). Thermal plant load factor (PLF) declined to 47.9% in May 2020 (April 2020: 42.4%; May 2019: 63.6%) on account of the lower demand. Central, state and private sector PLFs decreased to 55.2% in May 2020 (May 2019: 69.6%), 40.0% (61.0%) and 49.0% (61.3%), respectively. Thermal PLFs were the most impacted due to the decline in the power demand over March-May 2020, given the must-run status of nuclear, hydro and renewables.

The short-term power price at Indian Energy Exchange was lower at INR2.57/kWh in May 2020 (May 2019: INR3.34/kWh), as the difference in buy and sell bid volumes widened to negative 4,443 million units (negative 2,788 million units). The increased power demand in the short-term power market on account of favourable prices on the exchanges for both distribution companies and open access buyers and the gradual lifting of lockdown led to traded volumes increasing 47.8% yoy to 5,579 million units in May 2020.

The coal production by Coal India Limited decreased 11.3% yoy to 41.4mt in May 2020 for the second consecutive month, owing to lower production at its key subsidiaries – Mahanadi Coalfields Limited (down 3.7% yoy), South Eastern Coalfields Limited (down 23.1% yoy) and Central Coalfields Limited (down 29.5% yoy) due to the lower demand, leading to a high coal inventory. The coal inventory at thermal power stations rose 70.5% yoy to 49.6mtpa, due to continued coal production, as coal is an essential service despite the lower demand. Coal availability at pithead and non-pithead plants on 31 May 2020 remained at 20 days and 32 days, respectively.

The transmission line addition had been lower over June 2019-May 2020, with 10,912 circuit kilometres (km) added (June 2018-May 2019: 21,782 circuit km). The length of transmission lines added in May 2020 was also lower at 190 circuit km (May 2019: 977 circuit km), with 90.5% of addition coming from the central sector.