India’s Power Demand Surges to Five-Year High in September 2023, According to CRISIL Report

India's Power Demand Surges to Five-Year High in September 2023, According to CRISIL Report
India's Power Demand Surges to Five-Year High in September 2023, According to CRISIL Report

India’s power sector witnessed a significant milestone in September 2023, as power demand reached levels not seen in the last five years, according to a report by CRISIL Market Intelligence and Advisory (MI&A). The report sheds light on the dynamics driving this surge, the hurdles faced by the power industry, and what the future holds for India’s energy landscape.

Remarkable Year-on-Year Growth India’s power demand in September 2023 displayed remarkable year-on-year growth, surging to an impressive 140-142 billion units (BUs). This surge marks a five-year high in power consumption for the nation. However, it’s important to note that the demand in September was approximately seven percent lower than the previous month. This decline can be attributed to the exceptionally dry conditions experienced in August, which turned out to be one of the driest months in the past 122 years.

Unprecedented Peak Power Demand India experienced two consecutive months of all-time high peak power demand. In August, the peak demand reached a staggering 238 GW, followed by an even higher 240 GW in September. This surge underscores the critical need for reliable and efficient power generation and distribution infrastructure in the country.

Increased Power Generation Overall power generation in September is estimated to have risen by 9-10 percent on a year-on-year basis, reaching 150-152 BUs. August 2023 witnessed a record high power generation of 159 BUs. To meet the escalating demand for electricity, power generators increasingly turned to the short-term power market.

Factors Driving the Surge Several factors contributed to the surge in power demand. These include heightened agricultural, industrial, and manufacturing activities. The Manufacturing Purchasing Managers’ Index, a key indicator of industrial activity, rose to a three-month high of 58.6 in August, signaling increased manufacturing activity. Additionally, the onset of the festive season likely continued to drive demand into September.

Challenges in Meeting Peak Demand Meeting the soaring peak power demand has presented challenges, largely due to generation volatility. While solar and wind power are vital components of India’s energy mix, they face intermittency issues. Furthermore, hydro power, which offers a steady supply, witnessed a decline due to disturbed rainfall patterns, contributing to peak price fluctuations.

Transition to Non-Fossil Fuel Generation The CRISIL MI&A report notes a positive transition in the share of non-fossil fuel generation, which reached 26 percent by the third week of September, up from 23 percent in the first week. This transition provided some support to coal generation, alleviating pressure on the short-term power market.

Coal Stock Concerns Despite the shift toward non-fossil fuel sources, coal stocks at thermal power plants declined from 30 million tonnes on August 31 to 25 million tonnes as of September 25. This level of coal stock would suffice for power plants for nine days, down from 10 days in August. To address the increased coal requirement, the government extended the period of necessary blending of imported coal to March 2024, albeit with a reduced weightage of 4 percent from October 2023.

Future Outlook CRISIL MI&A anticipates that the growth trend in power demand will continue, with expectations of a 9-10 percent year-on-year increase in the second quarter of fiscal 2024 and a 5 percent year-on-year rise for the full year. These projections underscore the need for sustained efforts in the power sector to ensure reliable and sustainable energy access for India’s growing economy.