After the long-term power purchase is unused, the Union Energy Minister has proposed several reforms for short-term power purchase and sale. The ministry has proposed an integrated Day-Ahead Market (DAM) in power exchanges that will blend clean and conventional energy trading, improve price discovery and improve payments to power producers.
In the future, the ministry is also considering merging the DAM of all the power exchanges into one unit which will monitor the business of bidding for both renewable energy and conventional energy a day earlier. Officials said that for the time being, however, there are plans to launch the unified DAM without this merger.
In the proposals, the ministry said that all existing DAMs should be integrated with separate pricing for renewable energy and conventional energy. The partners will be allowed to place bids for the purchase or sale of renewable energy and conventional energy.
This step is being taken at a time when renewable energy in the country is facing shortage of buyers. According to industry estimates, there are currently 19 GW projects with no long-term power purchase agreement. 31 GW of renewable energy power projects are in various stages of construction, 21 GW is in the process of auction.
A note from the Ministry of Energy states, “Our country is undergoing a remarkable change towards becoming a sustainable energy economy in which the share of clean and green energy is increasing. It has been decided to bring integrated DM in power exchanges with the objective of keeping various options competitive to each other for market partners in renewable energy which will have different prices for renewable energy and conventional power. ‘
A senior executive of a power exchange said that the Ministry of Power has written to the Central Electricity Regulator, Grid Operator Power System Operation Corporation (POSOCO) and two exchanges to start integrated DAM by the end of June this year.
Currently, two platforms of the electricity business market in the country are Power Exchange India (PXIL) and Indian Energy Exchange (IEX). On IEX, 95 per cent of the spot electricity business market is traded a day ago. PXIL has a 40 per cent share in the term ahead market and renewable energy certifications. These exchanges have a number of power trading systems including termhead, green termhead, dayhead, one day and real time market. The business of electricity in DM is done one day in advance. Vendors here are power generation stations and buyers range from power distribution companies (discoms) to industrial and commercial consumers.
The Ministry of Power has proposed that buyers and sellers in the integrated DAM will indicate the amount of renewable energy and conventional electricity to be put up for bid. First of all renewable energy bids will be dealt at once. The entire volume traded in this section will be treated as a renewable energy purchase obligation. In cases where there is a non-selected amount of renewable energy, it will be inserted in the conventional section.
The Ministry of Power believes that this will facilitate the partners to recognize that they have actually purchased renewable energy from the exchange.