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Photo: Aniruddha Chowdhury/Mint
Photo: Aniruddha Chowdhury/Mint

Real-time power trading may lead to large savings for discoms

  • The Central Regulatory Electricity Commission, a key regulator for the Indian power sector, approved the launch of the real-time market from 1 April. The launch was delayed due to the nationwide lockdown imposed at the end of March

MUMBAI: A real-time market (RTM) for power trading, which launches in India on Monday, can lead to major savings for both distribution companies (discoms) and power generators as they can now buy electricity in spot markets just an hour before delivery. With the RTM, ordering a few million units of power will be as simple as buying a meal online and the delivery will take just as long.

Indian power exchanges believe that nearly 20 billion units of power will be traded every year on the RTM, making up for errors in demand estimates and unpredictable generation patterns, building a more reliant electricity network in the country.

Last year, the Central Regulatory Electricity Commission (CERC), a key regulator for the Indian power sector, approved the launch of the RTM from 1 April. Under the RTM, if a discom places an order between 9:30 am and 10 am, the electricity is ready to be drawn by 11 am, making delivery almost instant. The launch was delayed by the nationwide lockdown imposed at the end of March.

“So far, discoms had to rely on the day-ahead market to plan their scheduling," Rohit Bajaj, head - business, Indian Energy Exchange, told Mint. “They reference weather predictions, demand patterns, wind and solar generation estimates to plant for their demand and supply. But we’re in no position to predict factors like rainfall on an hourly basis. So the RTM lets you buy more power if you have scheduled for less; or you can sell if you have contracted for too much power. The errors of the day-ahead market can be corrected in the RTM," Bajaj said.

The RTM will also prevent a collapse of electricity grids. In 2012, the northern and eastern grid collapsed because discoms overdrew power, leading to the the largest power outage in history. “Since then, the regulator has brought in penalties for overdrawing from the grid; this can go up to as much as 16 a unit of power," Bajaj added.

The other option is to cut power supply to consumers through load shedding. For discoms that face demand for more power on any given day than they had scheduled for, buying on the RTM will be cheaper, Bajaj added.

The RTM is expected to reduce discoms’ reliance on the deviation settlement mechanism. India’s overall generation is about 1,300 billion units of power a year, of which 15-20 billion units is the annual deviation--the difference between scheduled power and real demand--or 50-60 million units a day. Bajaj expects that the bulk of this deviation will now move to the RTM instead.

“With the RTM, generators can offer the unrequisitioned surplus on their power purchase agreements for sale," Prabhajit Kumar Sarkar, managing director & chief executive officer (MD & CEO), Power Exchange of India Ltd, told Mint. “If there’s a sudden increase in renewable power generation, the generator can sell this as well and earn RE certificates," he added.

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