The easing of the lockdown and the partial resumption of economic and business activity has not led to a notable pickup in electricity consumption, a report from CARE Ratings said.
The rebound in electricity demand and generation in June-July 2020 has not been sustained. Electricity generation in August 2020 was 2.5 per cent lower than July. This indicates that economic and business activity continues to be limited despite the lifting of the lockdown in various regions.
The decline in electricity generation in August 2020 was due to thermal sources.
The decline in domestic electricity generation in August 2020 was led by thermal sources, which was 8 per cent lower than month ago. Lower generation from thermal sources was partly offset by higher output from renewable sources, mainly wind power which rose by 37 per cent during the month.
Although power generation continues its year-on-year decline, the pace of contraction has eased.
Although power generation continues to be lower than year ago, there has been an easing in the pace of contraction from the lows of April-May 2020.The decline in electricity generation on an annual basis has moderated from an average of -16 per cent during April-June 2020 to -3 per cent in July-August 2020.This improvement has been aided by the higher output of conventional and renewable energy.
Electricity consumption dropped to 3-month lows in August 2020, drawing back on the increase seen in the previous two months. The decline in consumption although broad-based across regions has been higher in the western and northern regions of the country.
Subdued demand scenario
Contrary to expectations, the easing of lockdown and resumption of economic activity in various regions has not resulted in a sustained increase in power consumption. Following an average monthly growth of 10 per cent during June-July 2020, domestic electricity consumption in August 2020 contracted by 12 per cent from month ago. Consumption however was 7 per cent higher than the lows of April 2020.
In terms of regional demand, there has been a decline in consumption across regions in August 2020 from that in July 2020. The month–on-month fall in demand at 16 per cent was the highest in case of the western region that includes the industrial states such as Maharashtra and Gujarat. The lower power consumption in these states indicates that industrial activity here has been lacklustre despite the easing of the lockdown and restrictions. The northern region saw the second highest monthly drop in electricity consumption of 13 per cent followed by the eastern region by 10 per cent and southern regions by 8 per cent.
Going forward
The improvement in electricity consumption and generation would be contingent on the pace of economic revival. With industrial and commercial activity likely to be subdued even with the easing of the lockdown and unlikely to attain prelockdown level of activity in the current financial year, electricity demand and the consequently generation would contract for the financial year as a whole.
Source: Release from CARE Ratings
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