Monsoon rains cool India’s electricity prices as supply outpaces demand

New Delhi: Power prices on exchanges have softened in August, with the day-ahead market (DAM) and the real-time market (RTM) rates edging lower than a year ago as heavy monsoon rains lifted supply, while cooler weather kept the demand subdued.

Data from the Indian Energy Exchange showed that the market clearing price (MCP) of power in DAM, where most of the exchange trading takes place was 11% lower at ₹4.17 per unit as of 22nd August, compared with ₹4.68 in the year ago period. Similarly, the price in RTM was 6% lower at ₹3.57 per unit.

According to experts, the fall in prices can largely attributed to an increase in sell bids or supplies on the exchange. There has been a 51% increase in sell bids on DAM at 10,378.37 GWh (gigawatt hour) in August. In the same period last year, the sell bids were at 6,865.90 GWh.

Rohit Bajaj, joint managing director at the Indian Energy Exchange, said the easing prices give an opportunity to distribution companies and commercial & industrial (C&I) consumers to meet the demand at competitive prices and to replace their costlier power by procuring through the exchanges.

India’s hydropower generation has been spurred by heavy monsoon rains while solar power has also got a boost from increased capacity. On 20 August, Mint reported that hydropower generation may increase by around 10% in FY26 due to robust monsoon rains.

Further, the demand for power on the exchanges has been lower than the supplies, thus weighing on the prices. The purchase bids so far in August have been at 6,041.02 GWh, way lower the sells bids that exceed 10,000 GWh.

Demand rebounds

Peak power demand this summer has been 241 GW, much lower than the projected 270 GW for the year. India’s record peak level so far was 250 GW in May 2024.

In April-June, India’s power demand fell 1.5% from a year ago, mainly due to lesser use of cooling appliances amid the early onset of monsoon. Demand fell to 445.8 billion kilowatt-hours during the period, data from the Central Electricity Authority showed.

The overall power demand was weaker this year up to July compared to last year, but the month of August has shown a rebound from the previous months.

According to Vikram V., vice-president and co-group head of corporate ratings at ICRA Ltd, power demand during April–July fell by 0.5% year-on-year, though July saw some recovery and August so far has shown positive growth. With a favourable base, demand growth could improve through October, unlike last year when it dipped during August–October, he added.

In the ongoing southwest monsoon season that started June, the country has received 632.7 mm rainfall, 2% above the normal level of 619.8 mm for the period.