A billion dollars in power generation fuel cost for May 2022. One billion dollars, highest-ever are often overused – but this one sure is a record. A record that may not stand much longer though, as peak consumption months are still ahead. If the commodity prices do not halt their bull run – the billion dollar monthly fuel cost could well be repeated twice again in 2022, if not thrice.

For starters, the system generation at 14.5 billion units for May 2022 – up 12.5 percent year-on-year. The 12-month moving average power generation stands at 11.6 billion units – growing at an average of 11 percent year-on-year. The growth is now reminiscent of double-digit growth of FY17-FY18. That was followed by three years of low growth (Covid included). From how things stand today, economic slowdown is an ever-increasing possibility – and power demand growth could well be the first casualty.

RLNG based power generation at 3.3 billion units was the highest in 34 months – with a 23 percent share, behind only hydel’s. The struggle was evident as the government decided to go ahead with the most expensive weighted average RLNG import price in the country’s history. Recall that the government had secured 12 LNG cargoes in total for May 2022 to keep them all running. Only that, it meant generating most power on RLNG in three years, on the highest ever rate.

The fuel cost of Rs94 billion almost five times higher than average RLNG fuel bill for the last four years. Such has been the price increase, that RLNG fuel bill for May 2022 alone was more than the entire fuel bill for any month till the same period last year. It cost Rs28 to generate one unit of electricity form RLNG – only slightly lower than the cost of FO and HSD based power generation.

The water flows may well have improved month-on-month, but at 24 percent share, hdyel power was not enough to mitigate the impact of rising thermal fuel costs. The onus on FO based generation did come down in May, as expected. Partly because of the paucity of fuel, and partly because FO based generation at Rs33 per unit sat pretty low on the merit order. Much depends on hydel generation as peak demand months lasting till October, will require hydel back to its previous best of contributing at least one-third to the total.

Procuring timely coal supplies contributed further to the high fuel bill – as coal based generation remained lower by 1 billion units from its peak. On a positive note, nuclear power generation is now consistently contributing in double digits during summer months.

The fuel cost, as a result, skyrocketed to Rs13.9 per unit, comfortably the highest ever – requiring an increase of no less than Rs7.96 per unit from the reference tariff of Rs5.93/unit. With quarterly adjustments to the tune of Rs2/unit already made and a large base tariff revision in waiting – it is difficult to see how the authorities would go about maintaining the growth momentum, going forward.