Rating agency ICRA has revised its energy demand growth outlook upwards from 6 per cent to 8-8.5 per cent for 2021-22. As per ICRA, low base last fiscal and faster-than-expected recovery in demand after the second wave of COVID-19 seen in April and May 2021 have supported this outlook upgrade. It said the all-India electricity demand during the period from April 2021 to September 2021 has increased by 12.7 per cent to 707 billion units (BU) on a year-on-year (YoY) basis supported by a lower base, improvement in economic activity and lower than normal monsoons leading to higher demand from the agriculture segment during July and August 2021.
The energy demand in H1 FY2022 (April to September) also, remained higher by 2.9 per cent against the same in H1 FY2020 (pre-COVID), led by relatively sharper recovery in the energy demand as reflected from 8.4 per cent growth in Q2 FY2022 (July September) against Q2 FY2020. ICRA had earlier estimated an energy demand growth forecast of 6 per cent for FY2022 in January 2021. Notwithstanding the recovery in electricity demand, it said the all India average thermal PLF level is likely to remain subdued, at below 60 per cent in the current fiscal. Thus, the sector outlook on the thermal power generation segment is negative.
This is also because of the lack of visibility in signing of new power purchase agreements (PPAs) for thermal independent power producers (IPPs) and an upward pressure on cost of power generation with the strengthening in fuel price levels and tighter environmental compliance requirements. As a result, a sustained improvement in electricity demand growth as well as thermal PLF level (above 60 per cent) remain the critical factors to monitor, from the outlook perspective on thermal generation. The spot power tariffs on day ahead market of the Indian Energy Exchange witnessed a sharp recovery to Rs. 3.7 per unit in 6M FY2022 from about Rs. 2.8 per unit in FY2021 led by better than expected recovery in electricity demand and coal supply constraints witnessed in August and September 2021.
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