A combination of installed capacity additions coupled with better utilisation of electricity supply amidst robust demand has helped cool down prices on power exchanges for the fourth month running.
According to Indian Energy Exchange (IEX) data, the weighted average market clearing price (MCP) in the day ahead market (DAM) during the first fortnight of February 2025 was ₹4.31 per unit, a decline of more than 23 per cent Y-o-Y. DAM is the most traded segment at the IEX.
At the same time, the average sell bids on the country’s largest power exchange rose by almost 32 per cent to 378,238.60 megawatt hours (MWh).
The trend has been continuing since the last few months. For instance, weighted MCP for October fell by 37 per cent Y-o-Y to ₹4.03 per unit, while total sell bids grew 76 per cent Y-o-Y to 12,474,022.42 MWh.
Similar trend was witnessed during November 2024, December 2024 and January 2025 with weighted MCP declining Y-o-Y by 15 per cent (₹3.52 per unit), 18 per cent (₹3.86 per unit) and 27 per cent (₹4.40 per unit), respectively.
During November 2024, December 2024 and January 2025, the sell bids on IEX grew Y-o-Y by 55 per cent (14,809,944 MWh), 57 per cent (14,465,266.6 MWh) and 43 per cent (13,099,977 MWh), respectively.
Analysts and power purchasers attributed the fall in prices mainly to a combination of steady increase in supplies along with active management by the government even as demand remains robust. For instance, capacity additions from April 2023 include 31 gigawatts (GW) of solar power, Wind (5 GW) and Thermal (7 GW).
Besides, coal availability has improved as the government has enhanced production. Coal imports for blending fell 19.5 per cent Y-o-Y from April to October as domestic production increased by 6.1 per cent on an annual basis. Also, imported coal prices have stabilised.
On the fuel side, there has been ample availability of coal this fiscal. Coal is available at a nominal premium of 10-20 per cent under the Shakti B8 auction and coal inventory as on January 30, 2025 stands at a healthy 19.8 days.
The mandatory sale of URS (Un-Requisitioned Surplus) power in the DAM market is around 50 million units (MU) daily resulting in reduced prices.
The Power Ministry also made adequate provisions to ensure availability for the winter months, by extending Section 11 directive to imported coal-based power plants to operate at full capacity up to February 28, 2025.
Analysts said that a deficit situation is not expected. However, weather may play some role in affecting prices in the short term.