Impact of COVID-19 on the Indian power sector

Impact of COVID-19 on the Indian power sector

On March 25th, 2020, India started a phenomenal 21-day lockdown to battle the spread of COVID-19. In these upsetting occasions of 'social separating' and 'telecommuting', the centrality of power in controlling our present and future social orders is more clear than any other time in recent memory. Nonetheless, the Power sector isn't insusceptible to the unfavorable impacts of the pandemic. The drawn-out effect of the present circumstance would just get evident with time. In any case, some early effects of COVID-19 on the Indian Power sector are as of now getting clear.

Effect on the framework:

In India, dispersion utilities have a lower duty for residential and rural customers,  even underneath the normal expense of supply, when contrasted with that for industrial and commercial consumers. Table 1 gives the electricity duty rates in Delhi for selected consumer categories to feature these distinctions. Thus, for several distribution organizations, the lower duty paying consumers are cross-sponsored by industrial and commercial consumers.

The COVID-19 lockdown has prompted closed down of everything except fundamental business exercises across the nation. Around 1.3 billion residents are obliged to stay inside the limits of their homes and, by and large, just permitted to telecommute. Thus, the power request from industrial and commercial consumers has decreased fundamentally while the residential demand is expected to have increased. As indicated by the Power System Operation Corporation of India (POSOCO), The power met on March 16th, 2020 – which can be considered as a nothing new situation – was 3494 MU when contrasted with 3113 MU on March 23rd, 2020 every day of willful curfew. It further decreased to a range between 2600-2800 MU between March 25th to March 31st, 2020.

Thus, firstly, a key risk from the COVID-19 pandemic for the already struggling distribution companies in India arises from the loss of revenues due to the reduction of demand from the commercial and industrial customers as well as the inability to cover the cross-subsidies provided to the lower-tariff paying consumer. Secondly, the utilities would also have to account for the expense to comply with any ‘must buy’ commitments that they have with generators with long-term power purchase agreements. The true and full extent of this risk would only be known once a quantitative analysis is conducted when this crisis is contained. Thirdly, at an operational level, distribution companies would have to account for deviation in demand and supply patterns at a temporal and locational level. Finally, during this period, critical infrastructure such as electricity networks would have to be run with minimum employees.

The trade on the wholesale power market comprises just 4.3 percent of the total electricity transactions. However, the transactions through the power exchanges have grown over the last decade. The Indian Energy Exchange (IEX) has seen a growth from 2616 MU in FY 2009 to 52,241 in FY 2019.

Now, the exchange the discount advertise is in four market sections 1) Day-Ahead Market 2) Term Ahead Market and 3) Renewable Energy Certificates 4) Energy-saving certificates. Recently, the Central Electricity Regulatory Commission (CERC) concluded the guidelines for executing continuous markets. This half-hourly market will empower the intra-day exchange of power, permitting alteration of age and utilization profile during the day. Before the COVID-19 pandemic, it was declared by CERC that the continuous market would be operational from April first, 2020. Be that as it may, the beginning date has now been postponed by two months to June first, 2020. As indicated by media reports, because of the COVID-19 pandemic, some necessary preliminaries couldn't be finished. This postponement in the ongoing business sector usage is probably going to have a genuine, antagonistic effect on the Indian Power market.

.Another effect of the COVID-19 pandemic on the Power markets is regarding the market dynamic. It tends to be seen that there is a dunk in the clearing volume and the market-clearing cost, which agrees with the step by step expanding shutdown estimates taken by the administration as a reaction to COVID-19 (See Figure 2). In this manner, the decrease sought after because of the lockdown is reflected in the volumes exchanged on the power advertise and the clearing cost.