To produce electricity or buy it? Industrial houses with captive power plants constantly ask themselves this as power on the exchange can be bought for as low as 2.80, while producing electricity can cost as much as 3.50- 4.
Large-scale manufacturing units in the South are currently making use of the cheap excess electricity available on the exchanges, while running their power generation units at half-capacity. “Currently there’s cheap power available on the exchange, but that’s not to say the same situation will continue. Sometime ago I bought electricity for as much as Rs 10-11,” says a top executive at a South Indian cement major.
With many states like Tamil Nadu, Maharashtra, Gujarat, Chattisgarh producing power in excess, experts say cheap electricity maybe available for a few more months going forward. With wind season strong in South now, power buyers are sitting on a problem of plenty.
While power exchanges are a big help, they still cannot cope with the actual demand and supply chain, say experts. “Only 10% of power consumed in India is being bought off the exchange. More than 90% of power is still being bought from state distributors like Tangedco or utility companies like Tata Power,” says James Rajan, director- service unit, South Asia, Wartsila India.
“One must also remember that not everyone has the capacity to lift/access power that has been produced. There are also tranmission constraints on the ground,” adds Wartsila’s Rajan.
But the power exchange has also proved useful in another regard — handling excesses of captive power plants of industrial hubs. “See sometimes electricity on the exchange trades above 3.50. When that happens, we have sold electricity – but only when it makes economic sense and is above our production cost. I am currently consuming 120 MW by running at 60%-65% of cement capacity. At full capacity, I might require as much as 180 MW. So its all about the market’s supply and demand dynamics,” says the executive from the cement major.
Electricity pricing also varies during peak hours and during the day and night. “It can even be as low as 2.20, buying for night consumption. Usually it is cheaper in the night and more expensive during the day and during peak hours or optimal hours of production,” says Rajan.
If the power exchange introduces futures contracts for power buyers, pricing could get more competitive, say experts. “Hedging against eventualities will work better for large-scale electricity consumers — provided one plays the market right. It will also give impetus and increase trading frequency,” says Arjun Bharathan, founder of startup Digigrid. Andrew Billings Womens Jersey