Research reports have suggested that there could be a fall in power demand, resulting in a surplus power scenario in India in a few years from now. But is this happening sooner than expected?

Overall power generation in November this year was up by 5% year-on-year to 62.5 billion units, but month-on-month generation fell sharply by 11% on account of a fall in demand, according to the latest data from the Central Electricity Authority (CEA).

As per the data for November 2010, peak deficit fell from 12% in November 2009 to 9% in November this year, helped by capacity additions over the past year. Overall energy needs grew only marginally-by 0.7% on a year-on-year basis-even while peak demand increase by 4%.

Month-on-month generation fell across all fuel categories (thermal, hydro, nuclear) as well as across sectors (for central, state and private power plants). An IDFC report points out that the "sharpest m-o-m fall was in hydro (-31%) and gas-based generation (-18.5%), while coal-based generation also fell 5.6% m-o-m."

In August, an ICICI Securities report said that 67 gigawatt capacity addition (over the next four years) would result in the power deficit dropping to low single digits and that this would put pressure on merchant power prices. With the supply expected to rise at a 10% CAGR till FY14E, ICICI had said that it expects the power deficit to come down drastically to just about 5% by FY14. Aggregate technical and commercial (AT&C) losses would come down to 25% by FY14E and if new thermal capacity would operate at say an 80% plant load factor (PLF) (against 75% assumed) there would be no deficit at all! (To read 'Merchant power: All plug and no play?' click http://www.moneylife.in/article/4/8794.html.)

In early November, Moneylife highlighted research by Religare and Macquarie which talked about rising PLFs but falling merchant power rates in October. (Read 'Utilities: Religare says PLFs up; Macquarie finds fuel concerns rule investor mindset' at http://www.moneylife.in/article/4/11144.html.)

IDFC's latest report points out that in November "NTPC's generation grew 2.7% y-o-y, but fell 9% m-o-m due to a sharp 23.6% m-o-m fall in gas-based generation; PLF of NTPC thermal plants for November 2010 was 85% compared to 89% in November 2009 and 88.6% in October 2010. Among private power producers, the highest fall was seen in the case of Jaiprakash Power's Baspa and Vishnuprayag plants (-47.8% m-o-m). GVK's Jegurupadu and Gautami power plants both reported a sharp fall in generation on year-on-year and month-on-month basis."

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)