In 2020, in a world affected by COVID-19, India’s power sector was no exception. The pandemic worsened the compromised situation of the sector, throwing some of the most unprecedented challenges. From commercial activities like billing, metering and collection due to physical distancing measures to power supply management due to sudden dropping of demand to the disruptions in global supply chain owing to restriction on Chinese imports, all were harshly impacted. However, the power sector, being part of the essential service, had maintained a steady and reliable power supply to the stressed hospitals and rising residential demand (despite a liquidity crunch).

Impact of Covid-19 on Power Sector Value Chain - A Snapshot

Source: POSOCO. (2020-21). Daily Reports. New Delhi: POSOCO. https://bit.ly/2Mgeei1

*The change in emissions is only with respect to the emissions from the power sector i.e the coal based power plants.

Source: MoP. (2020, December). Praapti. Retrieved from Praapti Portal: https://bit.ly/3aS6VYd & CEA. (2020). Multiple reports. Retrieved from https://bit.ly/3hNEsnF

Electricity DemandDistribution Generation and resource availability

Electricity Demand

Demand drop by 20-25%.

  • Highest demand reduction ~25% recorded in April 2020 wrt 2019 levels.
  • Most states saw a visible decline in their demand requirements during the lockdown months (March to June) ranging from -2% to as high as -38% (in the case of Punjab).

Low Billing and Collectionii

  • Discoms collection rate dropped around 70-80%, resulting in a cash crunch.
  • Seven to eight states imposed force-majeure to free themselves from the payment of fixed charges to generators.iii

Plummeting demand led to generation shutdowns and power surplus

  • Record low PLF of 42.4% for thermal power plants.
  • Power prices collapsed in the markets with the average market clearing price (MCP) hitting its lowest ever at Rs.1.95/kWh on 25th March 2020.

Distribution

Changing load composition with a rising domestic demand

  • Between March 25th to August 31st (the lockdown period) the domestic load increased from 24% to 36% whereas the industrial load decreased from 42% to 32%.
  • Sample households in states like UP and Maharashtra reported higher (26%) daily electricity consumption in the lockdown period as compared to the pre-lockdown period.
  • Industrial Index (RBI) was lowest in April 2020 (54.0).

Significant Revenue loss iv

Due to lockdown, it is estimated that Indian DISCOMs will incur 🡪

  • A revenue loss of 4 billion $
  • A liquidity crunch of 7.2 billion $

RE continued to rise and shine

  • Thermal power declined at 15% in Q2 (April to June) wrt to the pre-covid Q1 (January to March).
  • However, RE, with its must-run status, saw a corresponding 15% increase in its generation in Q2 over Q1.
  • India hydro power kept its promise showing the earliest reviving trend in June at 19%.

Generation and resource availability

Demand recovery started in early September

  • Power consumption was affected for six months in a row from March 2020 to August 2020. The demand showed recovery from September 2020.
  • Studies estimated slower recovery in the eastern and north - eastern regions, primarily due to their low-income levels.

Need for revival

  • Three months moratoriums to Discoms to make payments.
  • 90,000 crores packages for Discoms. Further extended to 1.27 lakh crore. A special long-term transition loan to help Discoms pay off their dues to generators and have immediate debt repayment.
  • The two-tranche loan was necessitated to be guaranteed by the states and assure the payment of interest and other charges. The second tranche would be released only after certain reform conditions on loss reduction and performance improvement were met.

Other Externalities

  • Rise in solar PV module cost by 10-20% due to decline in imports from China.
  • Due to supply chain disruptions and low demand, EV registration declined during FY21 with substantial fall during lockdown period (April-May’20) but is steadily picking up post relaxations after lockdown. Nonetheless, registrations have been lower as compared to last year.

The pandemic was an eye-opener in many ways. From India’s power sector perspective, the change in demand patterns across consumer categories and the resultant slump in its thermal electricity generation has impacted the financial and operational working of all the power utilities. However, after a dismal 2020, the electricity sector is slowly staging signs of recovery. India’s current installed capacity stands at 377 GW (Jan’21), While, coal continues to have a low plant load factor, the national peak demand has continued to rise since September 2020 and reached its highest level in January 2021 at 190 GW, seeing a 11% year-on-year growth. Considering the highest peak demand was reached in January against a typical June-July month; the power sector is set for an electricity demand boost in 2021.

i Aruga, M. M. (2020). Effects of COVID-19 on Indian Energy Consumption. MDPI. Retrieved December 30, 2020, from https://bit.ly/38POBML

iiSwain, A. K. (2020). Powering Through The Pandemic. New Delhi: Centre for Policy Research. Retrieved December 30, 2020, from https://bit.ly/2KDaqal

iiiNITI Aayog and Rocky Mountain Institute (RMI). (2020). Towards a Clean Energy Economy.New Delhi: NITI Aayog and Rocky Mountain Institute (RMI). Retrieved December 30, 2020, from https://bit.ly/2WXZVAJ

ivRajvikram Madurai Elavarasan, G. S. (2020). COVID-19: Impact analysis and recommendations for power sector operation. NCBI. Retrieved December 30, 2020, from https://bit.ly/3rCrWMl
Haiwang Zhong, Z. T. (2020). Implications of COVID-19 for the Electricity Industry: A comprehensive Study. CSEE Journal of Power and Energy Systems. Retrieved December 30, 2020, from https://bit.ly/3pwEO4X