Summer Surge: Power Demand Likely Hit All-time High In May

A spurt in usage of cooling equipment amid severe and prolonged heatwaves across the country, together with strong manufacturing activity, ensured robust demand for power in the first two months of this fiscal. Crisil Ratings in a report has said that India's power demand is likely to have grown 13 per cent compared with April-May 2023. In May, it is estimated to have surged to 156 billion units (BUs), logging a 15 per cent on-year increase. 

The country’s average maximum temperature rose to 35.6o C in April 2024, a 0.65o C departure from normal. Of the 30 days in April, maximum temperatures were below normal on only two days across the country. The heat waves were more intense in May, especially during the second half. 

States in northwest and central India and Gujarat faced severe heatwaves. Towards May-end, heatwave conditions extended to more parts of central and north India and Chhattisgarh, Bihar and Vidarbha. Pan-India maximum temperatures reached 45-48o C by the month-end. Temperatures touched a scalding 50.5o C, the highest of the season, in Churu, Rajasthan on 29 May.

Meanwhile, manufacturing activity, as indicated by the Purchasing Managers’ Index (PMI), remained comfortably above the expansionary mark of 50 in April and May at 58.8 and 57.5, respectively. This boosted power demand from the commercial and industrial segment. However, India touched new highs in peak power demand at 246 GW and 250 GW on 29 and 30 May, respectively.

Summer Power Generation Mirrors Demand

Overall generation is estimated to have increased 9 per cent and 18 per cent on-year in April and May, respectively, with the latter month recording a high of 169 BU.  With the implementation of Section 11 for gas-based power plants, the share of gas in overall generation increased to 3.1 per cent in May 2024 from 1.6 per cent in May 2023. 

At the other end, the share of coal in overall generation declined marginally, from 73 per cent to 72 per cent, while that of remaining fuels remained unchanged. To cater to the rising demand for electricity, generators have been increasingly turning to the short-term power market, according to the Crisil report. 

In line with the on-year increase in power demand, the volume traded in the short-term power market increased 29 per cent on-year in May. The volume in real-time-market (RTM) surged 38 per cent, indicating the need for immediate delivery during spikes in power requirement. Interestingly, RTM’s share as a percentage of volume on the Indian Energy Exchange (IEX) increased to 32 per cent in May, higher than the average of 22 per cent since its inception in June 2020.

With El Nino expected to wind down by June and La-Nina likely to settle in, growth in power demand is expected to ease in June and the second quarter of this fiscal. Economic activity is expected to continue aiding growth in power demand. However, a normal monsoon is expected to limit power demand from the agricultural and domestic segments in the second quarter. 

In the milieu, Crisil expects full-year power demand to increase 5.5 to 6.5 per cent on-year this fiscal.