Power system Management

19EEE337
Assignment-1
Regional power trading and energy exchange platforms
BY: K.ABHI SUBRAHMANYAM
CB.EN.U4ELC19019
I. Abstract: South Asia is the home of over 1.6 billion people. The countries in the region are aspiring to
become fully developed nations by the middle of this century. Rapid industrialization and attainment of
sustainable development goals (SDGs) are important requirement to achieve this goal. South Asian nations
thus need secured energy and power generation, distribution and supply. Currently the entire South Asian
region is energy deficient. Hence achieving energy security and adequate generation of power pose a major
challenge. However, regional and sub-regional collaboration in energy and power can enhance energy
security if indigenous energy resources are collectively utilized by the member countries. The recently
established Indian Energy Exchange (IEX) aims to facilitate in-country and cross-border power and energy
trading. Both power producers and buyers can bid live through the IEX platform. This paper reviews some
features of IEX and Australian Energy Market Operator (AEMO) in order to understand the operating
mechanism of such energy and power trading platforms.

II. Introduction:
South Asian region of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka is
the home for nearly one-quarter of world’s population (~1.7 billion) today. Despite having huge population,
the region is significantly lagging behind in economic and human development indices [1-6]. The inadequate
power generation and grid connected supply are considered to be the main hindrance [7-12]. All South Asian
countries are aspiring to become fully developed nations by the middle of this century. Rapid
industrialization and attainment of sustainable development goals (SDGs) are important requirement to
achieve this goal. Currently the entire South Asian region is energy deficient [10-13]. They need secured
energy and power generation, distribution and supply. The current installed power generation capacity in
each South Asian nation is shown in Fig. 1. The energy mix for power generation varies significantly in
South Asia. The power generation in Bhutan and Nepal is hydro based while Maldives power generation is
fully dependent on imported fossil fuel. Coal is the primary energy for power generation in India while the
natural gas predominantly is for Bangladesh.

III. Energy/Power Exchange:

There are generally two ways to reduce the energy/power cost: a) price of energy/power that customers pay
and consumption of energy/power itself. Despite raising awareness about energy conservation and efficient
generation, it is still difficult to reduce energy consumption mainly due to increased modern needs.
Therefore, the focus is now on the price of energy and power that consumers pay. Efficient production and
right procurement process are keys to reduce the consumer’s energy price. However, the right procurement
process is complex and daunting. Hence there is a need for Power Exchange through which both producers
and buyers can have competitive market access. Power Exchange is a hub where the market price (spot price
for short-term trading and forward price for future date) is determined based on demand and supply. The
principal stakeholders in power exchange are: a) power producers, b) power retailers and c) large end users.
The importance of energy/power trading through exchange has grown rapidly in Europe and elsewhere due
to increased energy consumption and market integration. Today, almost no country can address its
energy/power needs from its own sources. Energy/power trading through exchange ensures: i) required
supply and ii) protection from supply shortages and price fluctuations. There are several regional or in-
country energy and power exchanges have been established in Europe, North America and Australia [14-
16]. Some major power exchanges are:
 a) Nord Pool Spot for Nordic countries (Sweden, Finland, Denmark and Norway) and Baltic States (Latvia,
Lithuania and Estonia)
b) EPEX Spot for France, Germany, Switzerland and Austria
c) Nodal Exchange for North America (USA, Canada)
d) Australian Energy Market Operator (AEMO) for Australia

Fig.1. Installed power generation capacity in South Asian based on fuel type, adapted from [2-7, 13-14]

IV. Indian Energy Exchange (IEX):

In South Asia, India is the first nation which has recently established Indian Energy Exchange (IEX). It aims
to facilitate in-country and cross-border power and energy trading. Both power producers and buyers can bid
live through the IEX platform. The IEX is an automated electronic trading exchange regulated by the Central
Electricity Regulatory Commission (CERC) of India. It provides the physical delivery of power by enabling
efficient price discovery and counter-party risk management for participants of the power market, including
industries eligible for open access. Currently over 4,000 participants across utilities from India’s all 29
states, 5 union territories, 1,000 private generators and more than 3,500 open access consumers are using the
IEX platform to manage their power portfolio [14].
 At Present In Future

Fig. 2. Current and expected future member countries for IEX, adapted from [14]

Note: The map in Fig. 2 is tentative for bidding zones. It does not represent the actual political maps of
South Asian countries.

Presently the entire India has been subdivided into 12 bidding areas in five major zones: a) Southern Zone
(S1, S2), b) Western Zone (W1, W 2, W3), c) Northern Zone (N1, N2, N3), d) Eastern Zone (E1, E2) and e)
North Eastern Zone (A1, A2) as shown in Fig. 2. The IEX has planned to include all neighboring countries
including Bangladesh (B3), Bhutan (B1), Nepal (B2) and Pakistan (B4). Currently, India’s national power
transmission gridlines have been connected with Bangladesh, Bhutan, Nepal and Pakistan. The transmission
line between India and Sri Lanka is under construction. The capacity and cost of these transmission lines are
shown in Table 1. Through IEX, participants transact power on 15-minutes block basis, a day prior to the
delivery of power. Both buyers and sellers submit their anonymous bid electronically during the bid call
session. The Market Clearing Price (MCP) is determined on the basis of intersection point of demand and
supply curve and is common for both selected buyers and sellers. The Day-Ahead Market (DAM) is a
physical electricity trading market for deliveries for any/some/all 15 minute time blocks in 24 hours of next
day starting from midnight. The prices and quantum of electricity to be traded are determined through a
double sided closed auction bidding process. The operations are carried out in accordance with the
‘Procedure for scheduling of collective transactions’ issued by the Central Transmission Utility and Open
Access in Inter-State Transmission Regulations 2008 and the Bye-Laws, Rules and Business Rules of the
Exchange [14]. Some features of the ‘Day-Ahead-Market’ are:
 Trading of 15 minute contracts
 Double-sided anonymous auction bidding process
 Clearance obtained from SLDC by buyers and sellers based on availability of network and
ABT meters
 Congestion Management through market splitting and determining Area Clearing Price
(ACP) specific to an area
 Risk management through the requisite Margin, including any additional Margin as specified
for the respective trading segment or the type of contracts
Table 1. Existing & under-construction South Asia’s interconnectors, adapted from [17]
 S.NO Interconnectors Description Capacity (MW) Estimated Cost
(US$ million)
1 India-Bhutan (400 Hydropower 2,100 140-160
kV) Export to India
2 India-Nepal (400 Power Exchange 500 186
kV) between India-
Nepal
3 India-Bangladesh Power Exchange 500-1,000 192-250
(HVDC) between India-
Bangladesh
4 India-Pakistan Power Exchange 250-500 50-150
(220/400 kV) between India-
Pakistan
5 India-Sri Lanka Power Export to 500-1,000 650
(HVDC) Sri Lanka (under
construction under-
sea cable)

The IEX also allows Term-Ahead Market (TAM) that covers a range for buying/selling power for the duration
of up to 11 days. It enables participants to purchase power for the same day through intra-day contracts for the
next day through day-ahead contingency on daily basis for rolling seven days through daily contracts, and on
weekly basis through weekly contracts. The operations are carried out in accordance with the ‘Procedures for
Scheduling of Bilateral Transactions’ issued by the Central Transmission Utility under Open Access in inter-
State Transmission Regulations 2008. Currently, products in the Term Ahead Market include Intra-day, Day-
Ahead Contingency, Daily and Weekly contracts to help participants managing their power portfolio for
different durations [14]. Some common features of TAM are:
 Trading of Region specific contracts and Firm Delivery.
 The contracts under Term Ahead Market can be used to ensure delivery of power for a few days in
advance.
 Delivery Blocks: RTC/ Day/ Night/ Peak/ Hourly.
 FBA -- Firm Base – 24 hours and FNT -- Firm Night – 8 hrs. (0-7 and 23-24).
 FDY -- Firm Day – 11 hours (7-18) and FPK -- Firm Peak – 5 hours (18-23).
 Risk Management by collection of margins as specified in the Bye-Laws, Rules and Business Rules of
the Exchange.

V. Australian Energy Market Operator (AEMO):

The Australian Energy Market Operator (AEMO) operates the energy market and energy systems in all
states and territories except Western Australia and Northern Territory. It plans, develops and operates
market to support Australian energy needs and long term investment for Australia’s energy future. It aims to
provide safe, secure and reliable energy supply focusing on four key areas: a) security and reliability, b)
markets, c) forecasting and planning, d) settlements and prudential. It manages a) National Electricity
Market, b) Wholesale Electricity Market, c) Declared Wholesale Gas Market, c) Short Term Trading
Market, d) Wallumbilla Gas Supply Hub, and e) Energy Retail Market. Operated systems by AEMO are: a)
National Electricity Market (NEM), b) South-West Interconnected System (SWIS), and c) Victorian Gas
Declared Transmission System. Additionally it provides expert planning advice to industry about current
and future energy infrastructure requirement [15].

Australia possesses the world’s longest interconnected power system. The national Electricity Market in
Australia is stretching 5,000 km from far north Queensland to far south Tasmania as well as South Australia.
AEMO monitors the NEM from two control systems located in two different states (Brisbane in Queensland
and Sydney in New South Wells). Both centers operate round the clock and are equipped with identical
technologies and personnel in order to keep constant and secure power supply in all circumstances. Since
July 2016, AEMO has become an independent system operator in Western Australia [15]. This involves a
 complex series of energy transactions which are handled through NEM. AEMO manages the NEM
calculating consumers’ energy requirements and then scheduling energy from the generators to meet that
demand. It uses sophisticated system to tell generators how much energy to produce in every 5 minutes. This
energy then aggregated and scheduled to meet the demand. Scheduled energy then transported via high
voltage transmission line to power distributors who work with retailers to deliver it to households and
businesses [15].

AEMO is an arm of Australia’s energy governance structure. It operates alongside the Australian Energy
Regulator (AER) which oversees economic regulation and compliance with the national laws and rules and
the Australian Energy Market Commission which makes the rules. AEMO operates on cost recovery bases
and is fully funded through fees paid by market participants. AEMO’s ownership structure splits between
government and industry representatives (Government members’ 60% and industry members 40%). As the
national energy market operator and planner, AEMO plays an important role in supporting Australia’s
industry to deliver an integrated and secure cost effective national energy supply. AEMO maintains critical
services and sets new direction in energy sectors planning. The market uses sophisticated systems to send
signals to generators instructing them how much energy to produce each five minutes, so production is
matched to consumer requirements (spare capacity is kept ready for emergencies), and the current energy
price can be calculated [14-16].

VI. Discussion and Conclusion:

A recent study undertaken by ADB [17] on costs and benefits costs of six cross-border power transmission
interconnections (India-Bhutan, India-Nepal, India-Bangladesh, India-Pakistan, India-Sri Lanka and Central
Asia Afghanistan) reported that large scale transmission interconnection capacity would assist development
of large hydropower potential in Nepal and Bhutan which can then be transferred to India resulting in a
significant drop in fossil fuel use, power shortages and greenhouse gas emissions in the region. This study is
a unique effort to illustrate how important these benefits can be even with minimum interventions [17]. In
order to maximize the benefit for South Asian region, the transmission interconnectors should be developed
in an orderly manner, extending the Indian Energy Exchange (NEX) to accommodate regional trading and
strengthening legal and regulatory regimes. As a major economic, political, cultural, historical and
geographical location and the mega size of power generation systems, India must assume the role of a
central hub in driving South Asian power trading. A market-driven process for cross-border power trading
together with a regulatory framework that enforces a strong economic discipline would maximize the
benefits from the development of interconnection projects. [17]. It is estimated that current South Asian
interconnectors provide a benefit of over US$ 4 billion annually for the region against a cost less than one
tenth of that amount. South Asian regional power trade will strengthen mutual energy security and economic
prosperity. Access to grid connected power will lower social divide, income inequality, social tension, rural-
urban migration and enhance regional security.

VII. References:
1. BP Statistical Review of World Energy 2014 & BP Statistical Review of World Energy 2015,
http://www.bp.com/content/dam/bp/pdf/energyeconomics/statistical-review-2015/
2. Ceylon Electricity Board Statistical Digest (2013)
3. Economic and Social Statistics of Sri Lanka (2013)
4. Energy Statistics 2015, Issue 21, Central Statistics Office, Ministry of Statistics and Programme
Implementation, Government of India, New Delhi, pp. 1-103, www.mospi.gov.in
5. India Energy Security Scenarios 2047 (IESS 2047), NITI Aayog, Government of India,
http://www.indiaenergy.gov.in/
6. Ministry of Energy and Water, Afghanistan Government, http://mew.gov.af/en/
7. Ministry Power, Government of India, http://powermin.nic.in/
8. Nepal Electricity Company, http://www.nea.org.np/
9. Rasul, G. (2014), Food, water, and energy security in South Asia: A nexus perspective from the Hindu Kush
Himalayan region, Environmental Science & Policy, Vol. 39, 35-48.
10. Sankar, T.L., Raza, H.A., Barkat, A., Wijayatunga, P., Acharya, M. and Raina, D.N. (2010), Energy Security
for South Asia, USAID’s South Asia Initiative for Energy (SARI/Energy). www.sari-energy.org
11. Singh, B.K. (2014), South Asia energy security: challenges and opportunities, Energy Policy, Vol. 63, 458-
468.
12. Khan, I., Alam, F. and Alam, Q. (2013), The global climate change and its effect on power generation in
Bangladesh, Energy Policy, Vol. 61: 1460–1470
13. Bangladesh Power Development Board (BPDB), http://www.bpdb.gov.bd
14. Indian Energy Exchange, accessed on 20 November 2016 from http://www.iexindia.com.
15. Australian Energy Market Operator (AEMO), accessed on 14 October 2016 from http://www.aemo.com.au
16. https://corporate.vattenfall.com/about-energy/energy-markets/
17. Wijayatunga, P., Chattopadhyay, D. and Fernando, P. N. (2015), Cross-Border Power Trading in South
Asia: A Techno Economic Rationale, ADB South Asia Working Paper Series No 38, August.