Power demand to grow over 5% this fiscal, highest in three years: CRISIL

Improving industry demand is expected to prop up India’s energy consumption by over ~75 billion units (BUs) this fiscal, or 5 per cent on-year – the fastest growth in the past three fiscal, says a CRISIL Ratings report. Thermal plants will continue to be the mainstay generator of power to meet the higher demand of the country and to benefit the plant load factors of genco companies.

The heightened demand will be met largely by thermal generation companies (gencos) as generation from renewable, hydro and nuclear remains small at less than 25 per cent of the overall generation mix. That should charge up plant load factor (PLFs) of thermal gencos to approximately 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 near about 1 per cent for fiscal 2020 due to lower economic activity in the second half of fiscal 2020. 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.

Says Ankit Hakhu, Director, CRISIL Ratings, “Growth in power consumption this fiscal would be a break from the muted trend seen in the past two fiscals. It will ride on an expected recovery in industrial activity amid healthy GDP growth, forecast at 9.5 per cent on-year. The on-year growth of over 5 per cent or 75 billion units (Bus) would have been higher by as much as 100 basis points (bps), but for the second wave that hit us in the first quarter of this fiscal.”

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