Power trading volumes in short-term market rise 12% in FY24

New Delhi: Power trading in the short-term market increased 12% to 218.22 billion units in FY24 from 194.35 billion units in FY23, according to the annual report on short term power market for 2023-24 by the Central Electricity Regulatory Commission (CERC).

Short-term transactions of electricity and DSM (deviation settlement mechanism) volume refer to contracts that are for less than a year, transacted bilaterally through Inter-State Trading Licensees and directly between entities through power exchanges.

The report note that the short-term power market comprised about 12.5% of the total electricity generated in the country in the last financial year (FY24). The remaining 87.5% was procured mainly by distribution companies through long-term contracts and short-term intra-state transactions.

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"In terms of volume, the size of the short-term market & DSM volume in India increased from 194.35 BU in the year 2022-23 to 218.22 BU in 2023-24, registering an annual growth of about 12%," it said.

It noted that the volume of electricity transacted through power exchanges increased at a CAGR of 22.4%, and the volume of electricity transacted through traders increased at a CAGR of 3.1% from 2009-10 to 2023-24.

Trading on exchanges saw fastest growth

"Trading on the exchanges have witnessed the fastest growth among other constituents of the short term market, including bilateral trade and DSM. 

This has been the trend for many years now. Competitive pricing and flexibility are key to the growth of trading on the exchanges. Although majority of the power is tied up through long term contracts, for incremental demand, buyers come to the power exchanges," said Rohit Bajaj, joint managing director, Indian Energy Exchange

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During 2023-24, 4% of the volume of electricity transacted through traders was at a price less than ₹5 per kilowatt hour (kWh) or unit and 91% of the volume was transacted through traders was at less than ₹9 per unit. The price cap for trading on the exchanges is ₹10.

The prices were largely near the upper limit amid high demand and concerns of low supplies last year.

Noting that thermal power continues to be the most important source of power in the country, the report said that in FY24, thermal or coal power sources contributed 55% of the total installed generation capacity followed by renewable energy sources at 32.5%, large hydro projects at 10.6%, and nuclear at 1.9%.

Citing the growth trend in the last 15 years, the CERC report showed that the private sector participation in the power sector has significantly increased. It noted that during the period from 2008-09 to 2023-24, the share of the state sector in the total installed generation capacity declined from 54% to 24%, and the share of the central sector declined from 31% to 24%, while the share of the private sector increased from 15% to 52%.

"Gross electricity generation in India increased from 747.07 BU (billion units) in 2008-09 to 1739.09 BU in 2023-24, and it increased at a CAGR of 5.8%," it said.

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Further, in terms of power consumption, there has been an annual growth of about 6.4%, from 611.29 BU in 2008-09 to 1543.0 BU in 2023-24. During the period, the per capita consumption of electricity also increased from 734 kWh to 1395 kWh.