Indian Energy Exchange and Power Exchange India Ltd., started in 2008, are digital platforms on which power buying and selling companies come together to transact. They are not the market but a host to the market and their job is to ensure fair and transparent transactions. The aim of Power Exchanges is to retrieve the excess generation from surplus regions and transmit it to a deficit region at a market clearing price. Both the power exchanges are regulated by the Central Electricity Regulatory Commission (CERC).
The exchange offers products for electricity transactions in the following segments: Day-Ahead Market (DAM) allowing transactions to happen a day in advance and Term-Ahead Market (TAM) which comprises of Day-Ahead Contingency, Intra-Day, Daily, Weekly with contracts ranging from same day to up to 11 days in advance. Power Exchange India Ltd. has recently started the Real Time Market (RTM) for electricity transactions. With RTM, consumers can buy power on exchange an hour before the delivery. The consumers can include competitive users and distribution companies (DISCOMs).
DISCOMs are using RTM to their advantage. They are purchasing power at lower costs to bring down the overall expenditure on power procurement.
Initial patterns showed that the rates are considerably lower than the day-ahead market (DAM), and officials expect to see significant savings in the purchase of the power.
The RTM also registered a 52% month-on-month growth with a total trade of 785 MUs during July. With 241 customers participating, RTM saw selling bids volume at about twice of buying bids. While the sell bids saw a 17% month-on-month growth, buying bids witnessed a whopping 36% month-on-month increase, demonstrating growth and the rising preference of market participants for RTM.
Participation by DISCOMs
Around 31 DISCOMs have participated till date in the sessions of RTM. However, the participation of DISCOMs is still high in Day Ahead Electricity Market (DAM). Major DISCOMs that are buying electricity from RTM are Telangana, Rajasthan, Maharashtra, Andhra Pradesh & Haryana with average prices in RTM hovering around Rs. 2.34/unit.
On July 28, the RTM saw 42.69 MUs being the highest volume that was traded in a single day. The average monthly market clearing price was at Rs 2.49/ unit for RTM alone.
It is noteworthy that the RTM, besides effectively helping in managing last-minute demand variation, is also expected to reduce dependence on deviation settlement mechanism (DSM), one of the major problems faced by the DISCOMs.
Day-Ahead vs. Real Time Markets
While in the DAM, participants sell energy at financially binding day-ahead prices for the following day, RTM enables buyers or sellers to make a transaction an hour before the delivery. The RTM is designed to be a 30 min market with 15 mins for each auction session. There are 48 auction sessions. Although the sessions are conducted in time blocks of an hour, the delivery commences an hour after closure of the session.
Mahindra Susten’s Views
- RTM market has proved to be a blessing in disguise for market participants especially DISCOMs as early stages have indicated the lowest level of prices in a couple of months of its operation. It’s early days in predicting whether such prices will be on a sustainable basis but given that the DAM market has been a buyers market, it is expected that prices will be lucrative for high procurement agencies like DISCOMs in coming months.
- Reeling with COVID impact, RTM has been able to balance the supply demand for DISCOMs, Generators, OA consumers and Railways as well. It has real benefits in terms of backing down of costly thermal generation utilizing cheap power in RTM and meeting out Balance Power requirement when complete Power in DAM is not cleared.
- Unfortunately, RE generators have not been able to leverage the RTM & DAM markets due to infirm nature and most of the RE is tied up in long-term PPAs which provided little or no flexibility to participate in such markets. RTM provides for Generators too to balance deviations in real time. Going forward, the RE intermittency must be managed by market mechanisms such as RTM and it is expected that such mechanism may be available based on RTMs feasibility in bringing about behavioral changes in DISCOMs.
- It is desired that DISCOMs should lower barriers to allow Open Access so that industrial units also reap the benefits of RTM and bring about large-scale steadiness and stability to the grid.
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