An adequate monsoon this year has resulted in higher levels of hydro-power generation and utilities in at least five large power consuming states have switched from coal-fired electricity to cheaper hydel power.
For consumers in these states, this means lower electricity bills. For Coal India, which is already suffering from slower offtake due to low power demand growth, this is another blow. Rains have filled up reservoirs at dams, with some of them exceeding last year's levels, according to government data.
As a result, the authorities are releasing more water from the reservoirs, leading downstream hydelpower stations to generate additional power. The share of hydro-power in the country's total power generation increased to 15 per cent in July from 10 per cent in May, according to the data.
"On Friday last week, about 24,000 MW of hydel power was injected into the system, which is about 19 per cent of the total power used," said Rajesh K Mediratta, director of business development at the Indian Energy Exchange. "On an average, at least 20,000 MW of power is now being injected from hydel sources this monsoon."
Rainfall since the start of the four-month monsoon season on June 1 has been normal, equalling the long-period average as of July 27, according to a report by the India Meteorological Department.
Excess rainfall was received in 11 subdivisions and normal in 17, while it was deficient in eight subdivisions, the weather office said.
India had 42,848.43 MW of installed hydro-electricity installed capacity at the end of June, or about 14 per cent of the country's total, according to the Central Electricity Authority.
"A large number of hydel-power generation plants are old and their overhead costs are far lower than a lot many thermal power plants," a senior power sector official said. "While old hydel plants can sell power between Rs 1.5 per unit and Rs 2 per unit, some thermal power plants are producing at between Rs 2 per unit and Rs 2.5 per unit. Power utilities prefer to buy cheaper hydro-power as it would help them cut costs, which is finally passed on to consumers."
While coal can be stored and used to generate power when demand picks up, hydro-electricity has to be generated when there is a steady flow of water and cannot be kept for later, forcing a number of hydel-power producers to sell whatever is produced at throwaway prices, the official said.
"States like Punjab, Haryana, Rajasthan, Madhya Pradesh and Maharashtra are cutting down on coal procurement, leading to low sales growth, which is around 1.3 per cent in July this year against almost 9 per cent achieved in the previous year," a senior Coal India official said.