Unseasonal rains, surplus supply send real-time power prices crashing on IEX

On Sunday, RTM prices hovered around zero following overnight showers and thunderstorms in and around the Delhi-NCR region. On Thursday, the price for a single RTM block had dropped to an all-time low of 2 paise per unit before recovering. On a year-on-year basis, average RTM power prices have declined 22% to ₹3.69 per unit due to lower electricity consumption.

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"Unseasonal rains and thunderstorms in May kept temperatures low, resulting in a 2% year-on-year decline in electricity consumption during 1-21 May. At the same time, increased hydro, wind, and thermal generation created surplus availability, bringing down Real-Time Market prices to an average of ₹3.66/unit (May 1-24)—a 23.4% YoY drop. Notably, RTM segment recorded near zero prices in multiple time blocks (9:15 AM to 2:30 PM) on May 25," said Rohit Bajaj, joint managing director, Indian Energy Exchange.

The RTM allows power discoms and other entities to buy and sell electricity for immediate requirements, with physical delivery taking place one hour after market closure. It accounts for nearly 30% of the total electricity traded on the exchange.

Lower temperatures have reduced the use of cooling appliances such as air conditioners. Peak power demand across the country fell to 215 GW on Saturday, 24 May, compared to 220 GW or more recorded earlier in the month.

While the RTM is not large enough to directly impact household electricity bills immediately, sustained low prices may influence tariffs in the next fiscal year.

“Distribution companies (discoms) are required to inform the electricity regulator about their projected expenditure on power purchases from electricity exchanges. If they end up spending less than budgeted, the underspending is reflected in annual filings. This could prompt the regulator to revise tariffs downward in the next tariff order, potentially passing on the benefit to consumers," said an executive at a discom. However, he added, the RTM remains relatively small in scale, so its impact on overall power costs and tariffs is still limited.

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Power generators, meanwhile, are often compelled to supply electricity even when market prices are low. Withholding supply could mean missing opportunities to sell in upcoming time blocks when prices may be higher. Moreover, failing to deliver power after submitting bids can attract penalties under market regulations.

Thermal power plants also face technical constraints in ramping generation up or down. Frequent output fluctuations can reduce efficiency and wear out equipment. To avoid such risks, generators often continue supplying power at a loss to maintain stable operations. The recent rains have also boosted hydropower generation, putting additional downward pressure on prices.

Bajaj noted that RTM participants are using the low-price environment to their advantage by substituting costlier thermal generation with RTM purchases during solar hours, helping optimize costs and boosting market volumes.

“These trends underscore the growing importance of the RTM in giving discoms, open access consumers, and commercial and industrial (C&I) users the flexibility to procure power in near real-time and manage costs amid dynamic supply-demand conditions," he said.

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In the near term, prices are expected to remain subdued due to forecasts of continued rainfall and thunderstorms in Delhi-NCR and other regions. The India Meteorological Department (IMD) has also projected an above-normal monsoon this year.