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Power generation moderates

Generation evades strong growth trend on reduced demand

Power generation rose 4.5% YoY in December 2023 to 135bn units (BU). This modest growth was on a high base of December 2022, which saw a robust 14% YoY rise. The slight uptick in generation can be linked to decreased cooling demand during winters, thus deviating from the strong trend seen in the preceding three months. 9MFY24 demand rose 11% YoY to 1,318BUs. Peak demand cooled off to 213GW with seasonality. PLFs for coal-based capacities stood at 65% in December 2023 (68% for 9MFY24). Gas-based capacities operated at 10.4% utilization in December 2023 (9MFY24 PLF at 14.5%). Imported coal-based capacities saw improved generation on the back of Section 11, with PLF at 44.8% in December 2023.

Coal production volumes up 11% YoY

Production volumes were healthy at 93mn tonnes (+10.7% YoY), with 9MFY24 production at 684mn tonnes (+12.5% YoY). Dispatch rose 8.8% YoY in December 2023. Coal inventory at plants improved to 13 days in December 2023, after falling to 7-8 days in earlier months. e-auction premium was at 70% in December. CIL’s dispatch to the power sector rose 6.14% YoY to 67mn tonnes in December 2023. Imported coal prices averaged at ~USD 117 in December.

Modest capacity addition in 8MFY24; capacity at 426GW

Installed capacity rose by 10GW for 8MFY24 and 0.6GW for November 2023. Renewables continue to lead overall capacity addition, similar to earlier periods. Renewable capacity of 7.5GW was added in 8MFY24, of which 0.6GW came in November 2023. Coal capacity addition stood at 1.6GW for 8MFY24. All-India capacity now stands at 426GW – 213GW (coal), 25GW (gas), Nuclear (7.5GW), 47GW (hydro) and 133GW (renewables).     

YTD renewable auctions at 23GW      

December 2023 saw 4GW of RE tender awards. Solar and Hybrid accounted for 65% and 35% of the bids. YTD auctions at 23GW are much higher than 6-9GW in FY23 and largely in line with our estimates of 15-20GW+, the required annual run-rate for India. But the current rate is still below the government's 2030 target of 500GW. Dec 2023 onwards, prior to May 2024 elections, ordering activity may slow down as election embargo on government ordering sets in.

Our view: Positive prospects for Power        

Peak power deficit in a 7%+ YoY power demand growth environment and underinvestment in the past decade may drive sectoral investments. Soaring energy requirement, increased focus on energy transition, sizeable pipeline of capacity expansion, foray into green hydrogen, energy storage solutions (pumped storage) and regulatory reforms bode well for Elara Power universe.

We remain positive on NTPC and NHPC on assured returns from regulated assets and sizable capacity addition pipeline. We favor IEX due to its near monopoly in the growing short-term electricity market

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