In June, India’s energy requirement was at 105.61 billion units, compared to 118.57 billion units in the same month a year ago. That is a fall of 11 per cent, according to data published by the Central Electricity Authority.
“Peak demand has recovered to 90 per cent. This has improved over a period of time, despite localised lockdowns in various areas. We are in a good condition as far as electricity consumption goes,” said Praveer Sinha, CEO and MD for Tata Power.
But with the monsoon setting in, this recovery is tapering off. For the last three weeks, India’s energy consumption, in terms of a consecutive trend, has been largely stagnating, according to Power System Operation Corporation data .
Pradeep Mittal, executive vice chairman for Essar Power Business, expects demand to gain momentum once again in September.
“There is a visible recovery in power demand. The demand pick-up is in line with the reopening of the economy. We are close to pre-covid levels now. Entering into the peak monsoon, power demand will remain slight tapered for the time being and move up again from September,” he said.
Executives from the India Energy Exchange (IEX) also point out to an improvement in power trading activity, with volumes close to 90 per cent of peak levels.
“As far as industries are concerned, there has been a major rebound. Industrial demand, which on an average was 55 million units per day, was down to 10 million units in early April. Once the lockdown
was lifted, these industrial consumers have come back gradually,” said Rohit Bajaj, senior vice president and head of business development for the Exchange.
Metals, cement, glass and textiles are some of the key industries buying power through the Exchange.
Bajaj has a word of caution on the revival. “While overall power demand is up, regional patterns are important. The northern region has driven overall demand while in the south and west, it is still down,” he said.
Analysts at ICICI Securities in a July 9 report noted this trend, calling the country’s power demand recovery ‘Nike Swoosh’ shaped.
“States with a higher retail demand proportion have reached last year’s daily demand levels despite early monsoons. But daily demand in states with a higher commercial and industrial proportion is still on an average four per cent lower year-on-year, mainly due to the modest commercial demand,” said the report.
Experts agree that commercial demand is the missing piece in putting power demand back to pre-pandemic levels.
The ICICI Securities report said that the overall demand mix typically is 42 per cent commercial and industrial, 28 per cent retail and 21 per cent agricultural.
Executives with the electricity distribution companies have known for a long time that most large industries run on captive power, making commercial customers key to their finances.
Sinha expects the demand for power to normalise by the end of the year, when commercial demand will be back. He does not expect the ‘work from home’ trend to have a long-term impact on demand.
However, not everyone shares Sinha’s optimism. "I do not expect commercial demand to return anytime soon, as most offices and malls are still shut. As more companies decide to give up office leases, it will hit real estate companies, but also hit power consumption. Airports are other major consumers of commercial power and the travel trend is still weak,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu.
City transport networks such as metros and monorail also continue to remain shut. “For distribution companies, 30 per cent of their revenue is from commercial demand, as tariffs are higher for this category in most states,” said Mishra.
Meanwhile, distribution companies are opting for cheaper power from the exchanges. “Purchase volumes from distribution companies on our exchange has seen an increase on a year-on-year basis, while their own demand is still down on a year-wise comparison,” said Bajaj.
As power producers still wait for demand to recover in full to pre-pandemic levels, power is a buyer’s market. The seller-to-buyer ratio post-covid and lockdown
is now at 2.5 to three times, compared to the usual two times.