COVID-19 impact on electricity demand during lockdown
The shortages have reduced substantially in the last five years. Presently, we have been generating capacity that is under-utilised. However, due to the constraints in the transmission and distribution system, India continues to face long hours of power cut.
Energy deficit is calculated as energy available less energy required and is generally measured in terms of units, which is one unit equals one kilowatt-hour (kWh). Whereas, peak deficit is computed by deducting peak demand from peak met and is measured in terms of gigawatts (GW). These two explain the power supply position. The data is extracted from the report that is published annually by Central Electricity Authority.
Since the FY2013-14, India's power supply position has been improving significantly. In FY2019-20, the energy deficit and peak deficit narrowed down to 0.5 per cent and 0.7 per cent. However, similar to other sectors, even the power sector has also taken a hit due to the nationwide lockdown since March 2020.
During the COVID-19 outbreak, electricity consumption and generation have dropped substantially. The national peak power demand has seen a decline of 33 per cent from 177.1 GW in February 2020 to 133.3 GW in April 2020. Further, the peak power demand dwindled away by 25 per cent and 9 per cent on an annual basis in April and May, respectively. Since March 2020, the electricity generation contracted for three consecutive months amid lower demand.
Primarily, the significant decline in power demand was contributed by the factory and office closures in the commercial and industrial sectors, which accounts for more than 50 per cent of India's total electricity consumption. As people are staying indoors amid COVID-19 induced lockdown, the domestic demand has seen an uptick. However, it has manifestly failed to equipoise the decline in the overall demand for electricity.
The disruption in the demand for electricity would lead to revenue erosion thereby, encumbering the distribution companies (DISCOM) financial position that continues to record losses.
Industrial consumers pay the highest tariffs and low demand from them along with moratorium for payment of electricity bills by residential sectors, which will further slide down the finances of DISCOMs. Besides, such a situation can also impact other entities, including generation companies, in the supply chain.
Moreover, the resumption of economic activity could improve electricity demand amid the government easing the lockdown restrictions. However, it would happen gradually. International Monetary Fund (IMF) revised India's GDP growth downward in FY2020-21 to a negative of 4.5 per cent YoY from 1.9 per cent YoY earlier. This also accentuates that the demand for electricity may continue to remain subdued.