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Power demand to grow 5%, fastest in three fiscals: CRISIL

Power demand to grow 5%, fastest in three fiscals: CRISIL

On-year growth of over 5 per cent or 75 BUs would have been higher by around 100 bps if the second wave had not impacted the industry, said CRISIL

Power demand growth highest in three fiscals Power demand growth highest in three fiscals

Energy consumption in India is expected to surge by 5 per cent on year -- the fastest growth in the past three fiscals -- due to improving industry demand. The increased demand will be met by thermal generation companies since generation from renewable, hydro and nuclear plants form less than 25 per cent of the generation, said CRISIL Ratings in a report.

Plant load factor (PLFs) of thermal gencos would increase to 58 per cent, higher than the pre-pandemic level of 56 per cent. 

“After a cumulative growth of 5.5 per cent in the three fiscals through 2019, growth in power demand had fallen to ~1 per cent for fiscal 2020 due to lower economic activity in second half of that fiscal. Then, in fiscal 2021, demand declined by 0.5 per cent -- an aberration not seen in decades -- as the pandemic brought commercial and industrial activity to a grinding halt, particularly in the first half,” the report stated.

Ankit Hakhu, Director at CRISIL Ratings said that the on-year growth of over 5 per cent or 75 BUs would have been higher by around 100 bps if the second wave had not impacted the industry.

Bulk of the increase is likely to be absorbed by existing thermal capacities. Hydro generation that has been at a record high for the past two years will be lower this fiscal year as water levels of snow-fed plants were impacted due to lower snowfall last winter.

CRISIL said that nuclear generation is not expected to add any more units than it did last fiscal.

“Tepid growth in generation from other sources will drive ~90% of the incremental demand to be absorbed by thermal capacities. This, coupled with limited thermal capacity additions of ~5 GW will drive a 200 bps expansion in PLFs of thermal gencos compared with the pre-pandemic level of fiscal 2020,” said Rohan Kulshrestha, Associate Director, CRISIL Ratings.

The growth in demand and PLF improvement is likely to remain sensitive to lockdowns in case of another wave of COVID-19.

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