Energy on recovery path thanks to resumption of economic activities, improving demand from north, south

While energy demand continued to remain lower than last year’s figures in August as well, the power sector has been showing signs of recovery as economic activities begin to resume in the country after months of staying in lockdown starting March. The contraction in power narrowed down further in August to 2% as compared to 4.1% in July and 10.9% in June, a report said on Wednesday. This was driven by an improvement in demand from the northern region which was up by 1.3% after witnessing a slip of 0.8% in July 2020 and the southern region which was down by 4.5% as against the slip of 9.8% in July, India Ratings and Research said. Moreover, further lifting of lockdown for certain economic activities under Unlock 3.0 also pushed power recovery. 

“In August 2020, the all-India energy demand contracted 2.0% on-year for the sixth consecutive month to 109.8 billion units. However, it continued its recovery, as the decline in power demand narrowed during the month,” the report said, adding that despite the fact that energy demand showed signs of recovery, demand over April-August 2020 was lower by 11.0% on-year.

With an overall slump in demand, power generation also took a toll on and electricity generation, barring renewables, fell by 2.6% on-year to 103.4 billion units in August 2020. This was largely driven by on-year decrease in thermal generation. Thermal plant load factor (PLF) also declined to nearly half in August 2020 on account of the lower demand. Central, state and private sector PLFs declined to 58.5% in August 2020. Thermal PLFs were the most impacted due to the decline in power demand over year-to-date in FY21, given the must-run status of nuclear, hydro and renewables.

Meanwhile, the report said that the increased power demand in the short-term power market was on “account of favourable prices on the exchanges for both distribution companies and open access buyers and the gradual lifting of lockdown.”