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Whether it is the soaring temperatures or a slight revival in economic activities or a combination of both – the power generation statistics for May 2019 make a heartening reading. A 4 percent year-on-year increase in monthly power generation usually should not make for an outlandish reading – but any growth in positive territory after seven straight months of year-on-year drop is surely newsworthy.

The gross power generation at 12.6 billion units in May 2019 is the highest ever monthly number. The 11MFY19 power generation 109 billion units is also 2.3 percent higher year-on-year, at an all time high. This has set aside the fears of a year-on-year drop for FY19, which were seen growing till as recent as previous month.

If May 2019’s demand numbers are not an anomaly, even single digit growth should see record high generation numbers come peak demand from June to September. Producing those many megawatts should not be a problem, with all that dependable capacity in excess of 30600 MW. A close or two will have to be kept at the composition of the energy generation mix, which has shifted FO heavy to a more diverse mix with RLNG based generation fast catching up with that of hydel.

Just a couple of years ago, share of FO in power generation was 30 percent, and 20 percent last year, which has now come down to less than 8 percent and is expected to drop further in the days to come. That of hydel has remained almost same with usual fluctuations and no mega capacity additions in the same duration.

The generation based on imported fuel in FY17 was 36 percent, which has now moved up to 45 percent and counting. Granted that the move from FO to RLNG has surely saved ample in terms of fuel cost and import bill – but the absolute quantum of increase in share of imported fuel for generation, both LNG and gas – means more stress on import bill.

And now that the RLNG power plants are running at full steam and the coal ones also heating up to the task – expect fuel imports even without any FO imports to remain high. Such is the nature of contracts with the RLNG power plants that the government will have no option but to continue paying for power regardless of the merit order, till at least year 2032 – even if it comes at the cost of cheaper available indigenously produced electricity.

But for now, the emphasis on higher power demand is not misplaced, as that is one way out to minimize the impact of capacity payments that are only going to get bigger in FY20. It is about time that the focus is now shifted to address the cost of generation, having ensured generation itself.

Copyright Business Recorder, 2019


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