Cross-border trade with Bangladesh, Bhutan, Nepal from next month: S N Goel

Distribution companies have signed long-term power purchase agreements (PPAs) for meeting 90-92 per cent of the demand, said Goel

India Energy Exchange (IEX) launched new products in the power sector even as it unveiled its gas exchange this year. In an interview with Jyoti Mukul, executive chairman and managing director (CMD) S N Goel talks about demand boost in the power sector. Edited excerpts:

What is your estimate of power demand now as the country is crossing pre-Covid-19 levels in daily demand?

In 2021-22, demand will increase at a faster rate of 7-8 per cent. It is picking up in industrial states as well as the east and North-East. The government has come out with a Rs 3 trillion revival package for the distribution sector. Allowing a choice to consumers implies there will be multiple suppliers in the sector. If you have competition, then there will be market mechanism even at the retail end. Retailers will try to ensure quality of power and load shedding will reduce. So, that will drive power demand. On the supply side, we have surplus capacity in the country. Earlier, we used to have coal supply challenges but this year we do not have them. The e-auction price of coal used to be 50-60 per cent higher than the notified price. It is just 5 per cent higher than the notified price this year.

But the share of traded power is still very small. What will be its future share in meeting demand?

Distribution companies have signed long-term power purchase agreements (PPAs) for meeting 90-92 per cent of the demand. But now, we are seeing that a good part of the demand is already being utilised. There is unmet demand with the states for which they are coming to the exchanges. This demand is not round-the-clock or year-round. In some states, it is for five-six months for which they do not want to tie up for long-term power. The short-term power market used to be 3.5-4 per cent, but this year, there is a significant jump. Our share has reached almost 5-5.5 per cent despite Covid-19. The country’s power demand is 1,400 billion units, and at a conservative estimate, if the demand increases by 6-7 per cent, there will be an incremental 84 billion units. A significant part of this will be met through trading.

How are you preparing for cross-border trade in power?

The Centre issued a procedure for cross-border power transactions in February. This will start at the exchanges in one month. It will happen with neighbouring countries like Nepal, Bhutan and Bangladesh with which we already have a transmission network. We are ready with our system which is required for this kind of transaction.

Would you need to tie up with some parties to start-cross border trade?

In the day-ahead market, we have 700-800 participants every day and about 200 sellers. So, there is enough liquidity. There will be three additional participants which will be Bangladesh, Nepal and Bhutan.

What are the volumes in your new power sector products?

We started real-time market trading from June 1. It used to be 20-25 million units (MU) a day earlier but now it is 40-45 MU. There is very good liquidity. We also started the green term-ahead market on August 21 last year. The average clearing volume is 4-5 MU. We are seeing more participation.