Electricity generation sustains growth in January

by Manasi Swamy

Electricity generation from conventional sources grew by 5.3 per cent in January 2021 over its year ago level, greater than the 4.6 per cent growth achieved in the previous month.

At 108.4 billion kwh, electricity generation during January 2021 was the highest in over four months. The pandemic induced lockdown through March-May 2020 had led generation to plunge to levels pertaining in 2014-15. It slowly picked up when the economy started reopening in June. However, real momentum was gained only in September 2020 when generation surpassed its year ago level by 4.8 per cent. Electricity generation was even better in October. It grew year-on-year by 8.9 per cent, driven by the festive push. Although the y-o-y growth moderated to 1.6 per cent in November, traction in generation was anew in December when levels spurted y-o-y by 4.6 per cent. The buoyancy continued through January 2021.

The growth in generation was supported by a gradual push in demand as the economy limped back to normalcy. After moderating in November 2020, demand for electricity saw a gradual improvement since December 2020. As per the daily data for electricity consumption from the CEA, demand for electricity grew by 4.8 per cent over the corresponding period a year ago during January 2021.

Among the three conventional sources of energy, only thermal generation continued its growth streak and contributed to overall growth. At 97.2 billion kwh in January 2021, thermal generation was the highest in 20 months. With voluminous growth in thermal power, its capacity utilisations or plant load factor improved as well. It stood a 61.2 per cent in January 2021, marking a 3.6 percentage points increase over its year-ago level. Nuclear powered electricity, after five consecutive months of decline beat year-ago levels in November 2020. The performance improved further with a y-o-y growth of 5.9 per cent in December 2020. However, during January 2021, nuclear power generation tapered off. It declined y-o-y by 8.2 per cent. Hydro-electricity continued its contractionary phase, with generation falling y-o-y by 8.4 per cent in January 2021 after an 8.6 per cent decline in the previous month.

A push from the manufacturing sector possibly aided the growth in electricity generation in January. The IHS Markit Purchasing Manager’s index rose to 57.7 in January 2021, pushing through the 56.3 and 56.4 numbers achieved during November and December 2020 respectively. The underlying data reveals that in January, companies scaled up production at the fastest rate in three months. Industry accounts for nearly 32.1 per cent of total electricity consumption. Additionally, the current rabi season which has been the best season till date is likely to have contributed to the growth. Around 18 per cent of electricity demand stems from the agricultural sector.

Electricity generation in the southern region improved remarkably in January. In the four months prior to December 2020, the region had swayed into a deep y-o-y contraction averaging around 17 per cent. In December, it contracted by a much lesser 8.9 per cent. And now, in January 2021, contraction reduced further to 2.7 per cent. Tamil Nadu and Karnataka control a large share in electricity generation in the south. Both these states have since November 2020 reduced their y-o-y decline from an average of 16.1 per cent to 12.4 per cent in December. The Central Electricity Authority (CEA) is yet to release state wise electricity generation data for January 2021.

The north-eastern and eastern region’s generation performed well in January 2021. These are the only two parts of the country which posted a double-digit y-o-y growth in January. The y-o-y growth in generation in the northeast region doubled to 16.6 per cent in January from 8.6 per cent in December, while that in the east improved to12.4 per cent from nine percent.

Electricity generation in the north and the west too expanded y-o-y in January 2021. However, they were marginally lower than the previous month. Generation in the northern region grew y-o-y by 3.4 per cent during the month, a shade weaker than the 3.7 per cent growth registered a month ago. Similarly, generation growth in the west slowed to 7.1 per cent from 9.5 per cent.

The striking part about generation in the west is that while industrial and commercial activity is gaining pace for the past four months, electricity generation has seen a gradual slowdown since November. The western region is the manufacturing hub of India, alongside the southern region. Perhaps, state-wise data for the month will give a better insight into the recent slowdown in electricity generation seen in the region. If we look at December 2020 data, all western states barring Gujarat posted a slowdown compared to 2019.

Electricity generation was afloat during the first eight days of February 2021 as well. It was 4.6 per cent higher than the corresponding period a year ago. The continued growth in generation post the bright festive season suggests that the economy has managed to sustain the recovery.

References
1. https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&tabcode=001071005000000000&repnum=115046&frequency=M&colno=1