Spot electricity prices have halved from Rs 11 per unit on the India Energy Exchange in the past one week, mainly due to the possibility of onset of monsoon in Kerala and other parts of India and improved weather conditions in Tamil Nadu. Nadu and Andhra Pradesh.
While this would be a relief for state discs to buy spot power, it could be a detriment to Gencos, which the power ministry has asked to increase coal imports and increase PLF. The lucrative spot market was an incentive for imported coal-based power units in addition to sales cost pass-through promises. The Ministry of Power asked Gencos to import 10% of their coal requirements for mixing purposes, but there was low compliance between the power units.
Power Minister RK Singh will meet Power Genco and creditors on Friday to review their concerns over coal imports.
Significant correction has been seen in the real-time market in the previous day’s electricity prices and exchanges. The average price in the day-to-day market between May 6 and May 15 was Rs 5.41 per unit whereas the average real-time market price was Rs 4.63 per unit. Just 10 days ago, the average exchange price was around Rs 10.38 per unit. On Thursday, the average market clearing price for the day was Rs 5.96 per unit.
The ministry’s order under section 11 of the Electricity Act was based on the premise that if the discs refuse to purchase electricity, they will be able to sell electricity on the Gencos Exchange, while the profits will be shared equally with the discs.
Gencos is now saying that with prices falling on the exchange, importing coal would be a risky proposition when electricity cannot be sold on the exchange and refuses to buy discom. “The cost of imported coal is $ 200 / ton, the cost of power generation will be around Rs. 10 / unit. No discom has approved to buy such expensive electricity. Instead of pressuring generators to import coal, the central government should issue a directive to Discom to enter into an agreement to purchase power from imported coal, ”Vibhav Agarwal, managing director of RattanIndia Power, told FE.
“After controlling the free price on the exchange which has reduced the supply of electricity, now the government wants us to import coal and sell it on the exchange to increase the volume,” Agarwal said.
Experts say that the current power shortage will be eliminated only if the discoms are instructed to buy expensive electricity. This will give creditors confidence to enter into a tripartite agreement with Genco and Discom to lend working capital for coal imports.
Rahul Raizada, executive director of PWC India, said the reduction in fuel charges would not hurt Genco’s profits. In the absence of this section, Gencos will face various difficulties. “However, if the discs refuse to buy expensive electricity, the gencos can be returned, which means no fuel will be burned, so there will be no harm to the gencos. They are already subject to fixed charge changes, ”said Rayzada.
The power ministry on May 18 instructed Gencos to place orders for imported coal before May 31 and start blending 10% of their coal from June 15. Their overall demand, when their domestic coal quota will be reduced by 5%.
The Uttar Pradesh State Power Generation Corporation (UPRVUN), which operates four thermal power plants, is still awaiting government approval to import coal for its power plants. Not only that, the move by private jenkos to import coal has also been hampered, with the Uttar Pradesh Power Corporation (UPPCL) urging the state’s independent power producers not to go ahead with coal import ventures without its approval, which has left private players in a C-22 state.
A senior official of UPPCL, an umbrella company of five discs, told FE that the matter was pending for approval by the state government. “We are waiting for the direction of the government. “Once we get the consent of the state government, we will be able to move forward and start issuing tenders,” he said. “The difference in production cost with blended coal will be around Rs. 1 / unit, which needs to be factored in when revising the tariff. The whole merger process will cost consumers an estimated Rs 12,000 crore, ”the official said, adding that for a state like Uttar Pradesh, where 89% of its customer base is domestic, passing through would be a challenge.