Power Exchange Operation

ERLDC, POSOCO

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 • Overview –
– Evolution of Power Market
Contents

– Fundamentals: Review
– Power Exchange Concept
– Implementation in India
– Congestion Management
– Experience Gained
• Future Posibilities

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Transition from one voltage level
to the other
• The next voltage level was achieved
after 15 years.
• Technologically there was not much of
a change in raising the voltage from
132 KV to 220 KV.
• Change from 220 KV level to 400 KV
level required adoption of new
techniques.
 Introduction
• At the time of Independence power systems in the country
were essentially isolated systems developed in and around
urban and industrial areas.
• The highest transmission voltage at the time was 132 KV.
• The Electricity (Supply) Act, 1948 was enacted and CEA was
formed for coordinated development of Power Sector

State Electricity Boards (SEBs) were formed for development

of generation, transmission, distribution and utilization of
Electricity in their respective States and requirement of
integration of the state grids felt for emergency assistance.

Till such time the entire transmission was in HVAC at 132 KV.
Organisational setup of power
sector
• In 1964, for the purpose of integration of State
Grid systems the country was demarcated into
five Regions viz. the Eastern Region, the
Northeastern Region, the Northern Region, the
Western Region and the Southern Region

• The Regional Electricity Boards were

established in each of the regions for facilitating
integrated operation of state systems

• Inter state connections were aided by central

government as centrally sponsored schemes
for emergency assistance between the states
 Regional grid formation
• In early seventies power shortage started in various
parts of the country.
• In 1975, Central Sector generation utilities viz. NHPC
and NTPC were created to augment generating
capacity & Large capacity units planned to be added.
• These companies were also mandated to provide
transmission for their generation.
• For movement of such large block of power 400 KV
lines found optimal and for sustenance of bigger
generators integration of state grids required to
enhance system inertia.
• Regional grids were formed with 400 KV transmission
as back bone
 POWERGRID formed
To accelerate development
• To give thrust to implementation of
transmission system associated with Central
generating stations and intra-regional
transmission.

• Inter-regional links were also planned and

developed to facilitate exchange among the
various regions for emergency assistance
and transfer of operational surplus between
the regions.
 HVDC B/B INTRODUCED
To facilitate inter-regional exchanges between
asynchronously operating regional grids HVDC
back-to-back links were developed.
• 500 MW link between Northern and Western
Region at Vindhyachal.
• 1000 MW Western and Southern Region link at
Bhadravati.
• 2x500 MW between Eastern and Southern
Region link at Gazuwaka.
• 500 MW between Eastern and Northern Region
link at Pusauli.
 Landmark Events
 1948 ES Act
 1950-60 Establishment of state Grid system
 1962 First 220kV Voltage level
 1964 Constitution of Regional Electricity Boards
 1965-73 Formation of Regional Grids for integrated operation
 1975 Central PSUs in generation and transmission
 1977 First 400kV Voltage in state sector
 1980-88 Growth of regional grids-400kV back bone network
 1989 HVDC Back to Back for interregional controlled transfers
 1989 Formation of POWERGRID Corporation
 1990 First HVDC bi-pole Transmission line transfer within region
 Landmark Events
 1990 Generation of electricity opened up for private sector
 1991 Synchronous operation of ER and NER Grids
 1998 Electricity Regulatory Commissions Act
 1998 765kV initially charged at 400kV
 2002 Inter regional HVDC Transmission system
 2002 Goal set for All India National Power Grid
 2003 EA 2003- Balancing and short term markets
 2003 Synchronous operation of Western with Easter
and North Eastern Grid- Central Grid
 2005-06 National Electricity Plan
 2006 Synchronous operation of Northern , Western ,
Eastern and North Eastern Grid- first phase of
National Grid Complete- The ‘NEW’ Grid
 2008 Power exchange( day ahead market)
 Agenda
Competitive Power Markets
Evolution of liberalized power markets
Developments in the Indian context
Need for Competition
Development of Markets and Marketplaces

Development of Power Exchange in India

Way Ahead
 Vertically integrated monopolies used to supply electricity until 1980s,
worldwide (deregulation of transportation / financial services / wholesale
market for Natural gases).

De-regulation and unbundling into Generation, Transmission, Distribution,

System Operation, PX (Pools) resulted in enormous efficiency gain & price
reduction of electricity.

Liberalization of Electricity Markets

1st serious attempt to form liberalized electricity market: Chile, 1982

Followed by England and Wales in 1990 and Nordic Market (now Nordpool) in 1991

Australia, New Zealand, North America, California, Netherlands: Later half of 1990s

Electricity Act 2003 ushered in wide-scale changes in the sector

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 Vertically Integrated SEBs
Only SEBs entitled to buy or sell electricity
Generation and Supply largely owned by state or central sector companies
Inefficiencies leading to enormous losses in the system – debt restructuring
Private participation almost non-existent
Generation needed license
No significant participation in Transmission, distribution
Cost plus model followed by generators and distributors
Power traded through Long Term PPAs of 25 years or so
Complete absence of competition
Large captive capacities come up due to continued poor and inadequate
supply
Need Felt to Develop a Competitive Power Market
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 Large number of participants interact

Through free, fair and transparent marketplace

To provide appropriate goods and services

At fair prices

Determined by both long-term and short-term

demand-supply considerations

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 Allows multiple participants to compete with each other to
Provide High Quality
At Low Prices
Allows participants to manage their supply requirements by
Purchasing deficits from the market
Selling excess to the market
Therefore, investments on unneeded capacities is not wasted
Allows participants to manage the cost of supply
Purchasing lower cost supply from market and back-down expensive
generation
Availability of an efficient market allows investors to set-up
capacities
Part of long term capacity kept for sale as merchant capacity
Even long term capacity is easily set-up with the availability of a market
as a back-up
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 Allows multiple generators to come up and compete
Allows larger consumers to choose supplier
Prescribes competitive procurement of power on long term
Aims to create a National Market via compulsory open access
Policy framework assures
Reasonable and stable returns on investments
Well defined Regulatory mechanisms
Makes governments responsible for providing Power on demand

Commits the Nation to creating

A Competitive National Market in Electricity

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 Power Exchanges provide :
Common infrastructure for all market participants to buy & sell
Transparent & Fair price discovery through Anonymous bidding
Equity in terms of trades
• Common risk and reward structure provide comfort
• Similar to standardized bidding documents in long term space
Helps tide over poor credit quality of Discoms
• Daily payment culture setting in

Bring efficiency in usage of Transmission capacity

Providing encouraging investment signals to investors in
generation

Power Exchange is the Market Place for Competitive Power Market

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 Agenda

Competitive Power Markets

Development of Power Exchange in India

Regulatory roadmap
Exchanges in India and Benefits
New product development

Way Ahead
 Regulatory Framework for Power Exchange

2007 2008 June -

2003 June February – guidelines for
– guidelines scheduling of
enactment on setting transactions on
of EA 2003 up PX PX

2006 July 2008 January 2008 October

– CERC – guidelines –
issues for collective instructions
staff paper transactions for multi
on PX exchange
scenario

In transition towards a competitive market structure

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For illustrative purposes only
Load Curve and Management of Demand
36
34
in 100 MW

32
30
28
26

Hours
24
BASE LOAD
22
BASE LOAD

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Base Load – Managed through Long Term PPA’s

Seasonal Variations – Managed through Short Term trades, by

1) Traders, 2) Bilateral Contracts or 3) Wheeling/Banking Arrangements

Daily Variations – Managed through

1) Day ahead Power Exchange or 2) UI Balancing
 Day Ahead Contracts
Day-ahead Spot Market Real Time Market
Buy Bids Prices (INR / KWh) INR/KWh
1 5 7 10 Calculation of Imbalances
Resources Commitments
00-08 200
Hours

08-16 500 400 250

Imbalance
16-24 400
Sell Bids Prices (INR / KWh) Price MCP
Metered Day-Ahead
1 5 7 10
00-08 150 generation Schedule
Hours

08-16 400 500 600

MW
16-24 350 Volume

Day of Delivery (minus ‘1’) Day of Delivery

 Double-sided closed bid Auction  Final Day-Ahead Schedule includes PX
 Price / Volume Bids transactions.
 Binding Contracts  Deviations, linked to frequency of the Grid;
 Financial settlement based on Cleared Volume and Price - Balanced on a real-time basis
- Penalties for over-drawal or under-supply
- Benefits for under-drawal or over-supply

The Day-Ahead-Market for Indian PXs has been fashioned on the NordPool Market
 Product Development Life Cycle

1, 2, 3
Spot Market
7 (DAM, Intraday,
Market Maturity

6 Contingency)
4
OTC through
5
Exchanges
5
4 Forward Market
1 2 3 (Week / Month
Ahead)
Time
6,7
Market maturity depends on:
Futures and
a. Extent of liberalization of market b. Regulatory Support
c. Participation by entities d. Liquidity of transactions Options

Note: The time period varies from 2 to 8 years

 Various Products
Sl. No. Products Term / Duration
1 Intraday contracts For trades during the day
2 Day-ahead-contingency For 24 Hrs the next day
contracts
3 Week ahead contracts 24 Hrs of calendar week
4 Month-ahead-contracts 1st, 2nd and 3rd calendar months
5 Intra-state contracts For 24 Hrs after two days – Only within
State geographical boundary
 Longer Tenure Products – On Exchange
Longer tenure Products
Contracts directly between utilities or via traders
Contract structure continues to remain non-standardized
• Risks have to be detailed for each transaction separately
Individual search has to be conducted for buyers / sellers
Information asymmetry among different entities causes huge price variations
Credit issues also create lack of liquidity and uncertainty of financial
transaction
Single unit owners (like captives) have huge uncertainty in the absence of
appropriate penalty and risk management structure

Longer tenure products available on the Exchange help by

Increasing information transparency by providing a central infrastructure
Exchange ensures payments for all transactions
Managing open access applications centrally through the Exchange
 Agenda

Competitive Power Markets

Development of Power Exchange in India

Way Ahead
Experiences so far

Way Ahead
 Experience so far - Policy & Regulatory Gap
Electricity Act is silent on Power market initiatives
“Section 66 - The Appropriate Commission shall endeavour to promote the
development of a market (including trading) in power in such manner as may be
specified and shall be guided by the National Electricity Policy referred to in
section 3 in this regard”
National Electricity Policy makes a mere mention of it
5.7 COMPETITION AIMED AT CONSUMER BENEFITS
5.7.1 To promote market development, a part of new generating capacities, say
15% may be sold outside long-term PPAs…In the coming years, a significant
portion of the installed capacity of new generating stations could participate in
competitive power markets…:-
• ...D. Development of power market would need to be undertaken by the Appropriate
Commission in consultation with all concerned…
• ...F. Enabling regulations for inter and intra State trading and also regulations on power
exchange shall be notified by the appropriate Commissions within six months.

Need to define the development course to be adopted

 PX promotes competition in generation that leads to improved
efficiencies, increased supply & reduced price.

PX is an important mechanism to utilise transmission capacities

between regions, thus promoting a better national & inter-regional
utilization of sparse generation resources.

PX promotes Demand Side Response of price signals. Demand

Side Response is essential in any competitive market & contribute in
effect as an alternative to Generation Capacity.

PX provides financial security for long term investments in

generation & transmission. Runs competitive auctions of electricity
on non discreminatory basis.
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 Reduce Transmission Costs

Efficiency in Price Discovery

Optimize Generation Capacity Utilization

Optimize Transmission Capacity

Facilitate Sell from Captive Generators

Optimize Cost of Electricity Procurement

Facilitate Policy Objectives related to “Merchant Gen. Capacity”

Managing Counter Party Risk

Boost Investments

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 A competitive electricity market generally consists of five
elements working together for efficient operation of the
market:
Government, Regulator – Enabling Framework

Network Owner, System Operators - Infrastructure

Power Exchange, Bilateral Market – Market Places

Generators, Consumers, Suppliers, Traders – Market

Participants

Balance Responsible, Portfolio Managers – Service Providers

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 Government & Regulator – Govt. provides legal & policy framework for
development of competitive electricity market. CERC responsible for
regulation of inter-state entities & SERCs for intra-state entities.

Infrastructure Providers –
Transmission Utilities – CTU owns & operates all inter-state lines & STU
own & operates all intra-state transmission assets.

System Operators – Responsible for Real time operation of power System

ensuring security & stability of grid operation.

Power Exchange & Bilateral Market – Both the market co-exists &
provides platform for trading. Price reference of bilateral market is
from PX.

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 Market Participants – Generator, Consumer, Supplier & Trader

Generators – Operate both in wholesale market & PX. Generator includes

ISGS, State Generators, IPP & Captive Generators

Consumers/End users – Large scale consumers may operate in

wholesale market & PX

Suppliers – Normally serve end-users based on their own generation or

power purchased in wholesale markets

Traders – Although all PX participants are trader in a sense, buying &

selling energy, the term is used to classify entities without ownership/control
of physical assets to back up their positions. The traders facilitates
transactions between buyer & sellers and takes position in the market to
arbitrage on price fluctuations.
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 Balance Responsible – RLDC’s are responsible for operating the inter-
state balancing markets(UI Mechanism). Each of the states is a balance
responsible entity. However on implementation of intra-state balancing
market (intra-state ABT) each of entities become balance responsible
entities as per the provision of Intra-State balancing market regulation.

Portfolio Managers – Service providers are participants who themselves

do not have positions in the electricity market. These entities are “Portfolio
Managers, are companies who provide trading services on behalf of their
clients. This can include trading, electricity procurement, risk management,
forecasting, profiling, settlement and invoice service.

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Fundamentals: Review
 Market
– A mechanism through which buyers
and sellers interact to determine prices
and exchange goods and services
– Entire set of conditions surrounding
production, transport and distribution of
a product
– Size determined by geography,
transport, costs, etc.
In a market everything has a price !!!

• Price
– is the value (not cost) of the good/service in
terms of money

– represents the terms on which voluntary

exchange of goods & services takes place

– Serves as signal to the producers and

consumers
 Demand
• Need + Purchasing power = Demand
• Law of downward – sloping demand
– When price of a commodity is raised, buyers tend to buy
less of the commodity, other things remaining constant
(e.g., purchasing power, related goods, preferences,
environment, etc.)

Price

Quantity
 Supply Curve
• The supply curve shows the relationship between its
price and the amount of that commodity that
producers are willing to produce and sell, other
things held constant (e.g., cost of production,
technological advancement, related goods, etc.)

Price

Quantity
 Equilibrium
Quantity demanded is equal to quantity supplied

Surplus

Shortage
Price of
commodity

Quantity
Shift in equilibrium
Price elasticity (responsiveness) of demand
%age Change in Quantity Demanded in response to a one percent change in price.

More Elastic
Elastic

Perfectly Inelastic
Less Elastic

Perfectly elastic
Power Exchanges: Concepts
 Power Exchanges

An electricity Power Exchange provides a

spot market, mainly day-ahead, for
electricity, which like any other market
matches demand and supply for each time
block, while providing a public price index
 Role of an Exchange
• Standardized Specifications - Contract structure.
Tool for system operator to obtain the real-time balance
• Standard margining system
– Eliminates credit rating(stakeholder’s ability to pay debt)
• Risk Management in a volatile market
– Robust Clearing & Settlement systems
• counter party credit risk absorbed
– Fair, Safe, Orderly market
• Rigorous financial standards and surveillance
procedures
 Role of an Exchange
• Price Transparency
– Anonymous auction platform
– Price discovery by matching of demand-supply
– Long term price signals
• Transparent real time, pan-geographic price
dissemination
– Benchmark Reference Price
– Liquidity to Participants
• Risk Management
– Separation of Pricing Function
– Neutral, Secure and Self Regulated Market
 Bilateral Markets
Bilateral: Cooperative Approach

– Major Concerns –
• Price Discovery
• Price Discrimination
• Liquidity
• Transaction Costs

Power Exchange: Non-Cooperative Approach

 Exchange vs. OTC Contract
OTC contract
Available to limited market
participants
Bilateral/ Customized Contracts
Counter party credit risk
Is an involved participant
Opaque dealing
Bilateral dispute settlement
mechanism
Difficulty in reporting and
regulating various trades
Exchange Traded
Liquid market – wider market
participation
Standardized contracts
Counter party risk assumed by
exchange
Platform is Neutral
Transparent price discovery
mechanism
Well defined dispute
settlement mechanism
The exchange is the central
reporting and regulating
entity
Interplay:PX – Bilateral Markets (OTC)
• Rivals –
• Competition between two types of markets
• Complementary –
• Competition limited to day-ahead
• Preference to OTC in longer time frame
• Inter-dependent –
• Prices on the PX & OTC must be very close else arbitrage
occurs (Practice of taking advantage of a price difference between
two or more market)
• Hedging (Practice of taking a position in one market to offset and
balance against the risk adopted by assuming a position in a
contrary or opposing market or investment)
 The PX Clearing House
A clearing house is a financial institution that provides clearing
& settlement services for financial and commodities
derivatives and securities transactions. It stands between two
clearing firms and reduces the risk of one (or more) clearing
firm failing to honor its trade settlement obligations.
• Subordinate to the PX
• Intermediary for transactions
• Tracks all transactions
• Primary Role – Guarantee financial reliability to
the participants
• Participants required to maintain margin accounts
• Effectively hedges against credit risk
 Auction Models
PRICE PRICE
Demand Supply
Supply
Estimated
Demand

MCP

MCP

MCV VOLUME MCV VOLUME

One Side Auction Two Side Auction

MCP = Market Clearing Price MCV = Market Clearing Volume

 Market Clearing Price

PRICE
Accepted Purchase Bids (>= MCP)
Purchase Sale
(Consumers’ Discount)

MCP

Accepted Sale Bids (<= MCP)

(Generators’ Surplus)
MCV
 Price Calculation Algorithm -Day ahead– Hourly Bids

PRICE-paise/kWh 0 100 200 230 250 270 300 400 500 600 700

PARTY A-ZONE-1 600 600 600 400 400 400 400 200 150 100 100

PARTY B-ZONE-1 600 600 400 400 300 200 0 0 -50 -100 -200

PARTY C-ZONE-2 0 -100 -100 -100 -200 -300 -400 -500 -500 -500 -500

PARTY D-ZONE-2 0 0 -200 -300 -300 -300 -400 -500 -500 -500 -600

SUM, PURCHASE 1200 1200 1000 800 700 600 400 200 150 100 100

SUM, SALES 0 -100 -300 -400 -500 -600 -800 -1000 -1050 -1100 -1300

NET TRANSACTION 1200 1100 700 400 200 0 -400 -800 -900 -1000 -1200

800
700
AGGREGATED AGGREGATED
600 PURCHASE BIDS SALE BIDS
paise/kWh

500
400
300
200
100
0
0 200 400 600 800 1000 1200 1400
MWh/hr

Market Clearing Price (MCP) : 270 p

Market Clearing Volume (MCV): 600MW
Price Calculation Algorithm ….each hour
Price (Rs./kWh) 0 1 1.1 2 2.1 2.5 3 3.1 4 4.1 20
Portfolio A, MW 20 20 20 0 0

Portfolio B, MW 60 60 40 40 40 40 40 20 20

Portfolio C, MW 40 20 0 0 -40 -60 -80 -81 -120 -120

SUM, Purchase 120 100 80 80 60 60 60 40 40 20 20

SUM, Sale 0 0 -40 -60 -80 -81 -120 -120

Net transaction 120 100 80 80 20 0 -20 -21 -80 -100 -100

Price

4 Purchase Sale
MCP:
3
2.5
Rs/kWh
2

MW
40
80 120
60 MW
MCV (Market clearing volume):
 Advantage PX
• Promotes trade and competition
• Reliable price discovery
• Reference for bilateral contracts
• PX recognizes value of commodity (electricity)
• Does not guarantee lower prices
• Optimal utilization of sparse resources
• Generation
• Transmission
• Credit risks covered by the PX
• Congestion Management
• Facilitates trading short term surpluses arising
on account of uncertainty in demand forecasting
Implementation in India
 The Milestones
• July 2006: Staff Paper by CERC
• February 2007
– CERC Guidelines for establishment of Power Exchange
• August 2007
– In principle approval to the first power exchange in the country
• January 2008
– Revised Regulations for Open Access in Inter-state
Transmission, Effective 1st April 2008
• June 2008
– Procedure for Scheduling of Collective Transactions by CTU
– Commencement of operations of first exchange
• October 2008
– Second Exchange begins operations
Open Access Regulations, 2008
• Categories of Transactions
– Bilateral
– Collective Transactions discovered on a Power Exchange
• Nodal Agency
– Bilateral: RLDCs
– Collective: NLDC
• Transmission Charges
– Shift from “Contract Path” to “Point of Connection”
– Both buyers and sellers to pay
• Transmission Losses
– Applicable on both buyers and sellers
• Thrust on empowerment of SLDCs
• Groups of buyers and groups of sellers
 Regulator’s Approach
CERC Guidelines for setting up of a Power Exchange:

“The general approach of the Commission is to allow

operational freedom to the PX within an overall
framework. The regulation would be minimal and
restricted to requirements essential for preventing
derailment/accidents and collusion. Private
entrepreneurship would be allowed to play its role. The
Commission shall keep away from governance of PX,
which would be required to add value and provide quality
service to the customers”
 Eligibility Conditions
• Entities scheduled by RLDCs
– Deemed Regional Entity
• Entities whose metering and energy accounting done by
RLDCs
• Entities scheduled by SLDCs
– SLDCs to assess TTC/ATC for their State system
– Prior Consent from respective SLDCs
– Standing Clearance / NOC
• New Entities
– To Satisfy conditions as laid down in CERC Order
58/2008 dated 07.05.2008
– Obtain Prior Approval from RLDCs/SLDCs as per
jurisdiction
Salient Features of PX Implementation

• Voluntary participation
• Day ahead
• Energy only
• Physical delivery only
• Double sided bidding
• Hourly bids
• Uniform pricing
• Multiple exchanges
• Congestion Management using ‘Market Splitting’
 Information Exchange
Power Exchange SLDCs

Request for Scheduling

Provisional Solution

Constraints, if any

Acceptance by
Information
Final Trade Results for State

NLDC
exchanged over
leased line between Utilities & Intra State
NLDC and PX Entities to be sent by PX
directly to SLDCs

NLDC

Over WAN
Schedules

Schedules

Schedules

Schedules

Schedules
Trades
Trades

Trades

Trades

Trades
SRLDC WRLDC NRLDC ERLDC NERLDC

Over Internet
Schedules

Schedules

Schedules

Schedules

Schedules

(RLDC
Constituent Constituent Constituent Constituent Constituent
s s s s s
 Time Line for scheduling of Collective
Transaction NLDC to
send details
16:00 to RLDCs for
17:00 18:00 scheduling
10:00 12:0013:00 14:00 15:00 17:30 RLDC to
confirm
to NLDC

RLDCs/SLDCs to
incorporate
NLDC to Collective
Market confirm Transactions in
Participants to acceptance. the Daily
place their Bid PX to send files Schedule
NLDC to check to SLDCs for
for congestion. scheduling
PX to send
In case of
provisional
congestion shall
unconstrained
intimate PX PX to send Scheduling
solution to
regarding to the Request to NLDC based
NLDC and flow
period for on margin specified by
on TS as
congestion and NLDC/SLDCs
informed by
available
NLDC
margins
 Application from PX
• Application for scheduling :
– Summary of Collective Transaction
– Declarations
• Scheduling Request:
– Each Region
– Inter-Regional corridor
– At Regional entity Periphery
– Other Bid Area, Sub-Bid Area – if required.
 Treatment Of Losses
• Average transmission losses of the respective
region to be applied, both on Buyers and Sellers
– Sellers to inject extra power (MW) in addition to
contracted power (Contracted Power + Losses)
– Buyers to draw less power (MW) than contracted
power (Contracted Power – Losses)
• Applicable losses to be declared in advance
• Intra-State losses to be taken care of by the
respective SLDCs
• Additional losses for wheeling, if necessary
– To be notified in advance by NLDC
– Applicable only for Injection
 Treatment of Losses… for buyer

• NR (Regional) Loss: 6%
• S1 (State) loss: 4.85 %
• Buyer X bids for 100 mw at its respective regional periphery

Scheduled Drawal
Bid Volume <= SLDC Clearance

NR S1 X
100 MW
at NR Loss 94 MW at S1
periphery Loss 89.441 MW at
Buyer End (Buyer)
periphery

6% 4.85%

Maximum Bid= Volume in standing clearance + Regional & State losses

 Treatment of Losses… for seller

• SR (Regional) Loss: 6%
• A1 (State) loss: 4.85%
• Seller Y bids for 100 mw at its respective regional periphery

Scheduled Generation
Bid Volume <= SLDC Clearance

SR A1
Y
100 MW at Loss 106 MW at state Loss 111.14 MW
Injected by (Seller)
periphery
regional seller at its end
periphery 6% 4.85%

Maximum Bid= Volume in standing clearance – Regional & State losses

 Commercial Conditions (1)
• Charges for Collective Transactions payable to NLDC
• Application Fee
– @ Rs. 5,000/-, payable by PX to NLDC at the time of application
• Transmission Charges
– Applicable for each point of injection and drawl
– Charges for use of ISTS @ Rs. 100 per MWh
• Operating Charges
– @ Rs. 5,000/- per day per entity involved
– Buyers and Sellers in a State to be clubbed into separate groups
– Each group to be counted as a single entity by NLDC
• Payment by PX to NLDC
– Transmission and Operating Charges: By next working day
– Preferred Mode: Electronic Fund Transfer
• Default in Payment by PX to NLDC
– PX to pay a simple interest @ 0.04% for each day of default from the
due date of payment
 Commercial Conditions (2)
• Charges for Collective Transactions payable to
SLDCs
– Transmission Charges: As per SERC, if notified or
else Rs. 100/MWh
– Operating Charges: Rs. 2,000 per day for each point
of transaction
– Each point of injection and drawl to be counted
separately by SLDCs
– PX to settle SLDC charges directly with respective
SLDC
Congestion Management
 Congestion visible to the market
• “Congestion” means a situation where the demand for
transmission capacity exceeds the Available Transfer
Capability (ATC)
 Note: Here ATC = Total Transfer Capability (TTC) – Reliability
Margin (RM)
 Congestion does not necessarily mean that
• Load is not being met
• Generation is not being evacuated
 Congestion implies that an entity willing to pay is not able to access
cheapest source of power
 Existing transmission system was not planned with short-term open
access in mind
 Congestion
• Sign of growth and vibrant market
• Natural corollary to Open Access
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 When Congestion will take place ?
Scenario Congestion
N 4S X
1S 3D X
2S 2D X/
W E, NE 3S 1D
4D X

S= Surplus D= Deficit
S
 Congestion Management: Bid Area

Area Region States

N1 North JK, HP, CHD,
PUN, HAR
N2 North RAJ,DEL, UP,
UTT
W1 West MP, CHTG

W2 West MAH,GUJ, GOA,

DD,DNH
S1 South AP, KAR, GOA
S2 South TN, KER, PONDY

E1 East WB, SIK, BIH,

JHAR
E2 East ORISSA
A1 North-East TRIP, MEGH,
MANI, MIZO
A2 North-East AS, AP, NAGA
 NLDC Report on Congestion to PX
• Interconnections
– North, West, East and North-East synchronously connected
– South connected asynchronously.
• Power flows
– For synchronously connected systems, allocated notionally whereas the
actual flows follow the laws of physics
– For asynchronously connected system, the HVDC set points may be changed
but this would also have an impact on the flows in the synchronously
connected system.
• Congestion
– May occur simultaneously in multiple corridors
– May shift from one corridor to another while reworking solution.
• Iterative process
– Difficult to implement (time line has to be met)
• In order to avoid back and forth, if congestion is detected, then all the
limits are communicated to the exchange (all corridors, all regional
imports & exports)
• Automated without any manual intervention
Discovery of Multiple Prices & Interplay

• Prices discovered in Power Exchange

– Reflection of anticipated demand-supply position for
the next day

• Multiple Prices
– Collective Transactions:
• Two prices – one for each exchange
– Two Grids – two UI Prices
– In case of congestion, market split
• Area prices
• Multiple exchanges
 Multiple Power Exchange Operation
• First Power Exchange : 27th June 2008
– Indian Energy Exchange
• Promoters – Financial Technologies (India) Ltd., MCX, PTC.
• Key partners/investors – IDFC, Adani Enterprises, Reliance
Energy, Lanco Infratech, REC, and Tata Power Company

• Second Power Exchange : 22nd October 2008

– Power Exchange of India (PXI):
• Promoters – NSE, NCDEX
• Equity Partners : Power Finance Corporation, Gujarat Urja Vikas
Nigam, JSW Energy, GMR Energy, Jindal Steel & Power

• Third Power Exchange in the offing

– Promoted by NTPC, NHPC, TCS
Experience Gained
 STOA Approved Energy as a % of total Energy Generated in the country
8.0

7.2
7.0

5.2
6.0
% of total Energy Generated

4.4 4.4
5.0
3.8 3.7

4.0
2.9

3.0

2.0

1.0

0.0
2004-5 2005-06 2006-07 2007-08 2008-09 * 2009-10 * 2010-11*( April - Sep
)

*Includes Bilateral + Collective transactions

1/16/2019 ERLDC: POSOCO 97
 No. of Groups

0
10
20
30
40
50
60
10-Aug-08

9-Sep-08

1/16/2019
9-Oct-08

8-Nov-08

8-Dec-08

7-Jan-09

6-Feb-09

8-Mar-09

7-Apr-09

7-May-09

6-Jun-09

6-Jul-09

5-Aug-09

4-Sep-09

4-Oct-09

3-Nov-09

Date
3-Dec-09

2-Jan-10

ERLDC: POSOCO
1-Feb-10

3-Mar-10

2-Apr-10

2-May-10

1-Jun-10

1-Jul-10

31-Jul-10
Groups of Buyers and Sellers at Regional Level Scheduled For Power Exchange Transactions

30-Aug-10

29-Sep-10

29-Oct-10

28-Nov-10

28-Dec-10

27-Jan-11
98
1/16/2019 ERLDC: POSOCO 99
Volume Change During Congestion (1)
Volume Change During Congestion (3)
Volume Change During Congestion (4)
Volume Change During Congestion (6)
Volume Change During Congestion (7)
Market Clearing Price (MCP) - Volatility

Source: Website of Indian Energy Exchange (IEX)

Price Vs Volume (IEX)
Price Duration Curve (IEX)
Volume Cleared at Different Prices (IEX)
Correlation – Price and Shortage/Surplus
 Landmarks – Both PX
• Maximum Volume Cleared (Region-wise)
– Buy (MW)
• AR – 150, NR – 1223, WR – 650, SR – 1968, ER – 200
– Sell (MW)
• AR – 165, NR – 1131, WR – 907, SR – 597, ER – 765
• Maximum Volume Cleared
– IEX
• 1968 MW on 22- Nov-08
• 26.44 MU on 27-Jun-09
– PXI
• 384 MW on 26-Jun-09
• 7.07 MU on 1-Mar-09
– Combined (IEX + PXI)
• 31.98 MU on 27-Jun-09
• Total Energy Transacted through PX Between 27th June 2008 and 7th July 2009
– IEX – 3.92 BU
– PXI – 0.25 BU
– Total – 4.17 BU
• Highest Buying Region on any day (IEX)
– NR – 24.75 MU on 27th June 2009
• Highest Selling Region on any day (IEX)
– WR - 16.38 MU on 27th June 2009
Data taken for the period 28-June-08 to 7-July-09
Landmarks – IEX

Data taken for the period 28-June-08 to 7-July-09

Landmarks – PXI

Data taken for the period 28-June-08 to 7-July-09

Total revenue Retained by POWERGRID (upto 31.03.2009)
 Application fee + Operating Charge: 2.02 Crores
 25% of Transmission Charges: 4.15 Crores
Total : 6.17 Crores
 Power Exchange share in short term trading

Impact of PX on short term trading

PX transactions as % of trading licensees volume
PX transactions as % of total bilateral trade
35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Apr-09 May-09 Jun-09 Jul-09
Source : CERC June 09 report
 Exchange day ahead trade as % UI trading

PX transaction as % of UI transaction
PX transaction as % of UI transaction
30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09
Source : CERC June 09 report
 IEX monthly Average Price

IEX Monthly Average Spot Price

9
7.91
8 7.29
Average Price in Rs/kWh

7
5.76
6
5 4.54 4.52
4.08 3.90
4 3.43 3.43 3.37 3.41 3.39
3.14 3.18 3.24
2.78 2.66
3 2.34 2.36
1.99
2
1
0

Months
Monthly spot prices
IEX Monthly Volume

IEX Monthly Cleared Volume

1400
1211
1205
1181
1200 1128 1089 1121 1163
Monthly Volume(MUs)

1000
888 873
800 723 748
638 656
600 536 541 563563 591
450 478 472
434 425
376 355 377379
400 323
279 291
233
180
200
75
0.42
0

Months Total Monthly Volume (MUs)

 Cost of Transmission (paisa/unit)
– Comparison during 2008-09

• Avg. Cost of transmission during congestion : 219

• Avg. Cost of Transmission : 15

• Avg. Cost of Short-term open access : 6

• Avg. trans. Charge retained by CTU : 2

 Market Development

Exchanges
OTC Markets
Market
Maturity

Spot/
Auction Mkt

Individual
B&S

Time
 PXs Worldwide
• India www.iexindia.com ,
www.powerexindia.com

• Nord Pool www.nordpool.com

• Amsterdam www.apx.nl
• UK PX www.ukpx.co.uk
• IESO, Ontario www.theimo.com
• PJM www.pjm.com/index.jsp
• California ISO www.caiso.com
• Australia www.nemmco.com.au
 Electricity Markets worldwide

Courtesy: Power Market implemented

NORD POOL
Consultants Power Market planned/under implementation
Thank You