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Rupesh Sankhe, Power Analyst at Elara Capital, expects stronger peak power demand to support higher trading volumes on exchanges, with IEX likely to benefit from tighter supply conditions. Power demand is expected to remain strong over the next few months, with peak demand potentially rising to 290-300 GW as industrial activity and cooling requirements increase. Against this backdrop, the government's decision to invoke Section 11 of the Electricity Act for captive thermal power plants could benefit power exchanges and coal producers, according to Rupesh Sankhe, Power Analyst at Elara Capital.
Under the order, captive thermal power plants with capacity of more than 50 MW will have to operate at full capacity between October 1 and December 31. Sankhe estimates that around 30 GW of coal-based captive capacity could fall under the order. These plants are currently operating at around 65-70% utilisation.
The additional generation could add around 5-6 GW of incremental power to exchanges. However, Sankhe does not expect the move to completely address the expected rise in demand. “It's a good move, but it's not a game changer as such,” Sankhe said.
Peak power demand is currently around 260 GW and could rise to 285-290 GW, with the possibility of touching 300 GW. This would mean an incremental requirement of around 25-30 GW over the next few months, compared with only 5-6 GW of additional supply expected from captive plants. Power demand has already shown strong momentum.
Sankhe pointed out that demand grew around 14% year-on-year in September despite a high base from the previous year. The expected increase in peak demand could translate into higher trading volumes on power exchanges. Sankhe said IEX could benefit as more power is traded during periods of tight supply.
“Any kind of spike in the peak demand is definitely positive for exchanges like IEX,” he said. He noted that IEX volumes had grown around 17-18% in FY24-25 when overall power demand increased by only 3-4%, highlighting the potential impact of higher peak demand on exchange volumes. Coal India could also see higher demand as captive power plants are required to operate at higher utilisation levels.
Many of these plants may need to source additional coal through e-auctions, potentially supporting volumes and realisations for the state-run miner. Among individual companies, Tata Power could see a direct benefit from the Section 11 order due to its Mundra power plant. According to Sankhe, the plant could otherwise face around ₹1,200 crore in fixed-cost under-recovery.
With Section 11 in place, the fuel cost can be passed through, improving the economics of the plant. Meanwhile, renewable energy companies with battery storage capacity, including Adani Green and Acme Solar Holdings , could also benefit from the rising requirement for power during evening peak hours. Sankhe expects battery storage deployment to accelerate over the next two to three years as power companies increasingly participate in solar-plus-storage projects.
On coal availability, Sankhe does not see an immediate shortage risk. Around 70 power plants are currently running at critical coal stock levels, but he expects supplies from Coal India to improve, allowing plants to rebuild inventories. A more significant supply-side challenge could emerge if peak demand rises well above 300 GW.
In that scenario, Coal India and other authorities may need to step up coal supplies to power plants. For the entire discussion, watch the accompanying video Follow our live blog for more stock market updates (Edited by : Sriram Iyer) Note To Readers Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
Source: CNBC TV18
