How has 2022 been for IEX as the power sector has been largely eventful?
The year has been good in terms of improving demand. We have seen the demand coming in huge numbers. Overall, across the country, we have seen more than double digit growth in the first five months, which is very positive but our realization in terms of converting demand into our volumes is a bit low. This year, we have seen around 20% higher demand on our platform, but the problem is there are sales side and supply side constraints due to which we are not getting clear volume. Our transaction fee is based on the final volume cleared.
The prices of imported coal have increased by almost 200% compared to the last time (year) … and as a result have led to the discovery of very high prices. With all these things, we are meeting more than 90% of the domestic coal demand. We are importing the remaining part. All these factors have led to a rise in prices this year.
Overall, we are almost flat in terms of volumes as of August. There has been no increase so far. But, going forward, we expect things to turn upside down. With the intervention of the government, 2-3 things have happened. First, we are seeing a huge increase in coal production. With an increase of over 25% in coal production on a year-on-year (YoY) basis and over 20% increase in despatch to power plants in the first four months, the availability of coal stocks at power plants has increased . Few months back it was around 7 days and now it has increased to 11 days on average.
What is your outlook for September-October when another crisis situation is expected?
It is going to be in great demand in September and the coming months. Because, this is the time when the agricultural load is going to happen. But our preparation is much better than March-April when the average price had increased 10 (per unit). We are very well prepared in terms of coal stock position, many plants are not under maintenance, people have postponed their maintenance, availability of plants is much better as compared to March-April. Many imported coal based plants are in operation.
We believe that the worst is behind us. Though demand will remain high in the coming months, coal stocks are in a much better position. So, prices probably won’t go up to that level. Now the relief has started. It will only improve going forward. After November, aggregate demand will be less. In September, hydroelectric power generation will continue. He is also supporting us in a big way.
Your target for last year was 100 billion units. What is your goal for this year?
So far, we have seen decent demand growth of over 10% which will continue as the economy grows. This year, in the initial 4-5 months, we were facing supply-side bottlenecks, which have now started easing as the coal supply and inventory position is improving. Last year we did a business of 100 billion units. This year, we expect participation to increase further as prices come down as state discoms start optimizing their portfolio by buying from exchanges and replacing costly power. Prices have come down. In April, it was 10, this month it’s close 5. Thus there has been a steep decline and this trend is likely to continue and we can expect the growth momentum again.
What has been the share of renewable energy this year?
Green energy has immense potential. The percentage of green energy traded this year is about 8% of electricity. Today, some renewable rich states, which are fully meeting their RPOs and have surpluses, are selling off. States like Karnataka, Andhra Pradesh, Telangana, these are the three major states on the sales side and there are many buyers including all the northern states… So, fewer sellers, more buyers… This is a restraining factor here.
What new products and services are you planning to launch the product or services going forward?
Yes, there are ancillary services. The regulation exists and the date of commencement will be notified by the regulator. We hope that in the next 4-5 months we will be in a position to launch it. The ancillary market is where you’re really reserving capacity. The system operator is the buyer of the capacity. All generators that have surplus are sellers of this capacity. They place their bid, the system operator will retain the capacity and as and when there is more demand and requirement of more power and supply, they will direct to start the supply. These are ancillary services. Globally also it is very popular concept and widely used.
We are also working on the concept of cross bidding. We are going to launch it too. Cross bidding is a tool that helps the distribution company to optimize its portfolio. You can identify which is your highest cost variable power and you can sell all that power on the exchange and the buyer can buy from the market what suits his needs. It is widely used in Japan and Europe. We have applied for approval to regulatory CERC and after getting the approval, we will start it. In 3-4 months we will be in a position to launch it. There is also a lot of work to do for capacity contracting which is not yet in India.
What are your plans regarding battery storage?
This is a bit far-fetched. We are preparing. In terms of battery storage, exchanges are providing great solutions globally. There are many good options that exist. We are aware of those options. We are also working in that direction but it will take some time. Because even today the commercial viability of batteries is being questioned. It will take a few more years for it to become commercially viable. But yes, exchanges will play a huge role. There are concepts of auto-bidder where exchanges will provide you the facility to take the lowest price. They are available globally, such solutions will also be available in India.
Do high discom dues impact you?
We have been working for so many years. In no case have we noticed any default in payment. So we know there is a situation where the financial position is not very good but since till now the exchange is part of their total purchases and this share is not very much. The all India average is 7.7%, there are states that buy 15% from the exchange as well. So till now we have not faced any problem in getting money from distribution companies. They are buying and paying on time.
There are LPS (Late Payment Surcharge) rules where they have to pay all their pending dues to ensure that they participate in the exchange market. So a few weeks ago there were 13 defaulting states that were barred from participating in the exchanges and this happened after a period of 75 days, ending June 3, on that particular day 13 states were in default. All paid within 2-3 days. This is good for this area, good for everyone as it will improve the efficiency of collection. Somehow it will improve the whole system.
Does banning discoms from exchanges under LPS norms affect your operations?
No. We find out in the morning and we deactivate them (their trading). They cannot participate. But most of the time they get approval before 12 noon as they pay the dues. We haven’t seen any effect.
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