The Indian energy sector is currently experiencing a significant transformation, with the Indian Energy Exchange (IEX) playing a pivotal role amidst fluctuating market conditions. Following a steep decline of nearly 37% from its peak over the past year, investors are left pondering whether this is the right time to invest. A recent analysis by brokerage firm Nuvama sheds light on essential factors influencing power demand, thermal generation, and electricity pricing dynamics in the country.

Surge in Power Demand Amidst Renewable Energy Challenges

In February 2025, India saw a remarkable 6.6% increase in power demand, reaching 131 billion units (BU) compared to the same month last year. This uptick in consumption is noteworthy, particularly as it coincided with a slump in renewable energy (RE) output, which constituted only 21% of the energy mix. The report highlights that variations in temperature and a rise in industrial activities, as the fiscal year draws to a close, have significantly contributed to this surge in demand.

Thermal Power Takes the Lead as Prices Rise

As renewable energy generation faltered, the reliance on thermal power grew substantially. The report indicates that thermal power’s share increased to 79% in February, up from 77% the previous month. Additionally, the Plant Load Factor (PLF)—a critical efficiency metric—rose to 73.1%, surpassing 71.6% in February 2024.

Power pricing trends also presented intriguing insights. While IEX prices averaged about Rs 5.0/unit, remaining stable year-on-year, non-solar hours pricing saw a notable increase from Rs 3.3/unit in January to Rs 3.7/unit. Peak-hour pricing even escalated to INR 10/unit on several occasions, highlighting the volatility in the market.

IEX Experiences Significant Volume Growth

In spite of the fluctuating prices, the Day-Ahead Market (DAM) volumes at IEX surged 14% year-on-year in February. The brokerage firm pointed out that high prices during solar hours did not dampen trading activities, indicating robust market engagement. Furthermore, the peak power demand recorded a slight 0.32% month-on-month increase, further suggesting a stable demand environment.

Future Outlook for IEX and the Power Sector

As India’s power demand continues to rise, IEX remains a crucial player in the energy landscape. Although the broader market corrections have led to a decline in the stock’s value, experts advise investors to monitor developments within the power sector. Key areas of focus should include advancements in renewable energy, trends in thermal power, and ongoing shifts in pricing during both solar and non-solar hours.

With these insights, stakeholders can better navigate the complexities of India’s evolving power market and make informed investment decisions.