POWER TRADING, ABT &

POWER EXCHANGE
Concept of Trading

 In Electricity Act 2003, trading is defined as:

“PURCHASE OF ELECTRICITY FOR SALE
THEREOF”

 Trading recognized as a distinct activity

Indian Power Market
 Installed capacity ( As in 1947) 1362 MW
 Present Capacity (As on 01.11.08) 145,554.97 MW *
 Actual Power Supply Position (2007-08) – Source MOP
 Energy requirement : 7,39,345 MU
 Energy availability : 6,66,007 MU
 Energy shortage : 73338 MU (9.9%)
 Peak Demand : 1,08,866 MW
 Peak Met : 90,793 MW
 Peak Deficit : 18073 MW (16.6%)
 Peak Power Demand growing at 6.5% (Compounded Annual Growth Rate)
and Energy Demand at 6%

 Installed capacity to grow at 10-11% to achieve average GDP growth of 8%.

*Source: MoP
India Power Supply Scenario

Energy
AvailabilityRequirement Actual DemandPeak
Demand MetDemand
BU 770 739 766 108 90
766 110 108
765
105
760
755 100

750 95
GW
BU 745 90
739 90
740
735 85

730 80
725 Actual Demand Demand Met
Availability Requirement
Why Trading?
 Existence of shortages in meeting peak as well as overall demand.

 In spite of the overall shortage, the inherent diversity in demand of

various States and Regions in the country results in periods of seasonal
surplus in one State or Region coinciding with periods of deficit in
another.

 This coexistence of overall shortages with complementary geographical

and temporal surplus-deficits provides substantial opportunities to
improve the economic efficiency and security of supply through trading of
power both within as well as across Regions.

 Realizing the full benefits of trading requires the availability of adequate

transmission capacity and inter-regional links for transfer of power from a
surplus to a deficit entity and support
Why Trading..
 To develop a full fledged, efficient and competitive market mechanism for
trading in power and to facilitate the development of generation projects
including through private investment, both resulting in reliable, economic
and quality power in the long term.

 Develop power market for optimal utilization of energy

 Promote power trading to optimally utilize the existing resources

 Catalyze development of Power Projects particularly environment friendly

hydro projects

 Promote exchange of power with neighboring countries

Role of Power Trading
 Trading creates a market based on enforceable contracts for buying and
selling power.

 Enables (a utility with) a smaller power system to become part of a large

system, obviating the need for reserve capacity and affording increased
reliability as well as utilization.

 Benefits;
 Seller gets to operate generation capacities at higher utilization
(which would otherwise be backed down); realizes efficiency and
economic benefits.
 Buyer gets to meet critical loads in a reliable manner, often
substituting costlier sources of generation; realizes reliability and
economic benefits.
Trading Process

REB/RLDC
(S.O./Reliability Forum)

Generator/
Trader Purchasing Utility
Exporting Utility

Transaction margin
retained by trader

POWERGRID
(CTU) or STU

Contract
Power flow
Payments
Related Regulations

 Electricity Act – 2003

 Trading License related regulations – Jan 2004

 Inter State Open Access regulations (2004 amended in 2008)

 Fixing of Trading Margins (January 2006)

Delhi Model of Trading

Delhi Model

CGS/ IPP/ Traders

Delhi Power
Procurement Group

Discom1 Discom2 Discom3

Power Trading Current Scenario
• Most of the supplies are locked up in long term PPAs.

• Short term trading constitutes 3% of the total supply.

• Trading essentially between surplus & deficit distribution utilities.

• Trading is essential for resource optimisation and meeting short term

peak demand.

• Most of the trading is inter-regional

Current Scenario…
• Open Access Regulations have facilitated power
trading in an orderly manner.

• Energy agreements and transmission clearance have

to be arranged separately.

• Open Access charges are reasonable and simple to

apply.
Current Scenario…
• Suppliers call for bids from buyers/traders.

• Traders compete to win the supply bids.

• Buyers have no option but to buy from the trader having the
supply contract.

• Due to deficit scenario, suppliers dominate

• Price of traded electricity is going up.

Short Term Trading Volume
FY02 FY03 FY04 FY05 FY06 FY07
Mus 1617 4178 11029 11847 14188 20963

25000 20963
20000
14188
Mus 15000 11029 11847
10000
4178
5000 1617
0
FY02 FY03 FY04 FY05 FY06 FY07
Availability Based Tariff
Need For ABT

 Grid indiscipline
No respect for schedule by generating
stations as well as beneficiary SEBs

 Poor Frequency regime

Low frequency during peak periods, high
frequency during off-peak periods
Components of ABT

 CAPACITY CHARGES

 VARIABLE CHARGES

 UNSCHEDULED INTERCHANGE (UI)

Concept of ABT
 Capacity (fixed) Charge recovery of generator linked to
Availability, Capacity charges payable by beneficiary based on
capacity allocated

 Energy (variable) charges based on scheduled energy

 Unscheduled Inter change (UI) charge is levied for deviation

from the schedules

 Rate of UI Charge is based on frequency

 Settlement period of 15 minutes

 Applicability - Generation at Multi-beneficiary Central Generating

Stations (ISGS) and drawl from such generating stations by
beneficiaries
How UI Pricing works- High Frequency

Example: Generating Stations

Generating Station
A B
Energy Charge (paise /Kwh) = 96 72

Frequency(Hz) = 50.26 50.32

UI Rate (Paise /Kwh)= 128 96

Gain (Paise/ KWh) for generation below schedule = -32 -24

Conclusion:
Generating station A should srart reducing generation if frequency rises to a
level at which UI rate is 96 Paise/KWh i.e. 50.26 Hz
Generating station B should start reducing generation if frequency rises to a
level at which UI rate is 72 paise/KWh i.e. 50.32 Hz
How UI Pricing works- Low Frequency

Example: Generating Station

Frequency (Hz) = 49.4

UI Rate (Paise /Kwh)= 640

Energy charge of the generating station despatched

below availability or having margins 295

Gain by generating over the schedule (Paise /KWh) 345

Conclusion:
A generating station under ABT should, if feasible, start generating
above schedule if frequency dips to a level at which UI Rate is equal to
its energy charge.
How UI Pricing works- High Frequency

Example: Beneficiaries
Frequency (Hz) = 50.1

UI Rate (Paise /Kwh)= 160

Variable cost of costliest operating generating station

owned by the beneficairy (Paise /Kwh)= 120

Gain (Paise/ KWh) for drawal above schedule (by

reducing generation at own costiliest station) -40

Conclusion:
Beneficiary should start reducing generation at the costliest operating
station (and overdraw from the grid) if variable cost of this station exceed
prevailing UI Rate.
How UI Pricing works- Low Frequency

Example: Beneficiaries
Frequency (Hz) = 49.9 49.4

UI Rate (Paise /Kwh)= 240 640

Variable cost of the cheapest hot standby generating

resource owned by the beneficairy (Paise /Kwh)= 150

Loss (Paise/ KWh) for each unit of drawal above

schedule (and not harnessing own standby generation) 90
Conclusion:
Beneficiary should start generation at the cheapest hot standby unit if frequency dips
to a value at which UI rate becomes equal to variable cost of this unit.
Beneficiary should start loadshedding if UI rate is high and there is no standby
generating resource.
IEGC – Frequency Control
 Beneficiaries (States)
 The States may, at their discretion, deviate from the drawal
schedule. Deviations to be appropriately priced (UI Rate)

 Provided that the States shall always endeavour to restrict their

net drawal within their respective drawal schedules, whenever the
system frequency is below 49.5 Hz

 When the frequency falls below 49.0 Hz, requisite load shedding
shall be carried out in the concerned State(s) to curtail the over-
drawl

 Automatic under-frequency relays as per plan finalised by REB

IEGC – Frequency Control
 Generating Stations (ISGS)
 The ISGS may also deviate from the given schedules depending
on the plant and system conditions.
 Deviations from the ex-power plant generation schedules to be
appropriately priced.
 Provided that when the frequency is higher than 50.3 Hz, the
actual net injection shall not exceed the schedule.
 Also, while the frequency is above 50.3 Hz, the ISGS may (at
their discretion) back down without waiting for an advise from
RLDC to restrict the frequency rise.
 When the frequency falls below 50.0 Hz, the generation at all
ISGS (except those on peaking duty) shall be maximised, at least
upto the level which can be sustained, without waiting for an
advise from RLDC
 Governors in normal operation all the time
Scheduling Procedure

Time
Availability
10:00
Declaration
11:00 Entitlements

15:00 Requisition &

Bilateral Agreements
S
I Injection Schedule R Drawal Schedule
17:00 L
S L
D
G D
22:00 Revision in DC Revision in Requisition
C
S C

23:00 Final Final

Injection Schedule Drawal Schedule

Revisions during Revisions during

Current day Current day
Scheduling at State level
S D
T ENTITLEMENTS I
DC
A S
REQUISITION
T C
E INJECT SCH DRAWL SCH O
M
GEN

ISGS SHARES
R S
Entitlements of Discos
L L
REQUISITION In ISGS & State Gen
D D
Worked out by SLDC
C C
DRAWL SCH

S
D
T
ENTITLEMENTS I
A
DC S
T REQUISITION C
E
DRAWL SCH O
INJECT SCH M
IPP
Settlement System
 Settlement period- 15 minutes

 Declaration, scheduling and UI accounting on 15 minute basis

 Special Energy Meters - for time differentiated measurement of energy

(and voltage differentiated measurement of reactive energy)

 Energy Accounting (capacity and energy charges) - on monthly basis

 UI accounting on weekly basis

 UI payments are received in a pool and payments are made from the
pool
Logistics
 SEMs installed by POWERGRID

 Meter readings downloaded and sent to RLDCs every week by staff of

generating stations, POWERGRID and beneficiaries

 RLDCs validate and submit data to REBs by Thursday noon for the week
ending midnight of previous Sunday

 REBs carry out UI charge accounting (weekly basis) and energy

accounting (monthly basis)

 RLDCs to operate UI pool on behalf of REBs

So What Is ABT? (1/4)

It may be viewed as;

 A commercial mechanism for improving Grid

Discipline and Frequency Regime

 A commercial mechanism for Merit Order Operation

 An efficient Default Market for Trading - encourages

trading arrangements
Grid Discipline & Frequency profile(2/4)

 Payment of Capacity Charges based on capacity

available rather than energy generated - Avoidance of
unwanted generation

 UI Charges - Load shedding/ increased generation at

low frequency and reduction in generation at high
frequency
Merit Order Dispatch (3/4)
 Strictmerit order operation - if generation
scheduling is done for all the generating
stations in the grid by single entity (Centralized
scheduling)
 In our decentralized scheduling system UI
Rate encourages:
 Backing down of generation in decreasing order of
variable cost as frequency goes up
 Picking up of generation in increasing order of
variable cost as frequency goes down
Default Market For Trading (4/4)
 UI rate serves as default rate for trading.

 UI rate depends on frequency is indicator of demand-

supply gap

 Rate depends on demand-supply gap- efficient

market.

 Encourages trading agreements to hedge risk of UI

charges
ABT Implementation
 Western Region - 1.07.2002
 Northern Region - 1.12.2002
 Southern Region - 1.01.2003
 Eastern Region - 1.04.2003
 North-Eastern Region - 1.11.2003
Impact Of ABT- Genco
 Advanced control & monitoring systems to closely monitor ex-bus output of plant
 Generation should closely follow 15-minute schedule
 Integrated information & communication system
 To capture data from all components
 Unscheduled downtime is not very acceptable in the ABT regime
 To ensure economic operation
 Cost of generation, ramping, start up & shut down of each unit varies
 Performance calculation for each unit of plant
 Corresponding optimization to be done
 Pro-active management plan
 Unscheduled deviation from power generation schedule incur considerable
penalties
 Unexpected downtime of power plant should not occur
Impact Of ABT- Transco
 Improved and efficient transmission systems
 More generation capacity being added
 Bottleneck in transmission to be avoided
 Better forecasting systems
 Vested with role of coordination between consumers & generators
 Better communication and information systems
 Communicate 15 min generation & consumption schedule to each party
 Convey any unforeseen change in such a schedule
 Improved metering & billing system
 Ensure adequate metering capabilities for proper implementation of tariff
structure
 Specialized energy meters that keep track of 15-min energy aggregates &
frequency for each interval to take care of energy charges and UI charges
Impact Of ABT- Discom

 Enhanced load forecasting system

 Consumer expected to stick to schedule of 96 intervals of 15-minute for each day
 Failure to comply will attract penalty - UI charges
 Basis of entering into commercial agreements with generating utilities

 Reliable communication and information infrastructure

 Load forecasting solution highly reliant on historical data for accuracy
 To ensure smooth coordination with RLDC

 Provision for in-house generation

 Captive power plants - going to be more & more popular during transition to
decentralized & deregulated power market
Types of Trading

 BilateralAgreements
 Banking Agreements
 Power Exchange
 Available other resource
Bilateral Agreements
 An agreement in which each of the parties to the contract makes a promise
or promises to the other party.

 Bilateral agreements are of two types.

 Bilateral Import
 Bilateral Export

 These can be done on real time basis, day ahead & on firm Basis.
 Real time :- the agreements done on the same day, sometimes 11/2 hour
before the scheduling of power. As it takes only 11/2 hour to get the power
scheduled depending on the availability of transmission capacity.

Day Ahead basis:- the agreements which are done one day in advance.

Firm basis :- the agreements for which the open access have been applied
in advance. Maximum tenure 3 months
Bilateral Agreements

REB/RLDC
(S.O./Reliability Forum)

Generator/
Trader Purchasing Utility
Exporting Utility

Transaction margin
retained by trader

POWERGRID
(CTU) or STU

Contract
Power flow
Payments
Bilateral Agreements (Scheduling) contd..

 Bilateral Export

 The consent is taken from the respective SLDC for the sale/purchase
of power.

 The availability is given to the traders that how much quantum is

available for the export.

 The traders give the offers to the buyers/sellers.

 The rates are decided on mutually agreed price.

 In this whole process trader acts as a communicator between the

Buyer & Seller.

 All this process is done verbally.

Bilateral Agreements (Scheduling) contd..

 After this trader sends a letter of intent (LOI) to both Buyer & Seller.

 After signing of agreement by both the parties, as per the agreed quantum & price, the open
access application is forwarded to both buyer & seller.

 Both buyer & seller have to give there consent to the offer.

 The consent is then forwarded to the respective SLDC’s for there approval.

 After getting the approval from the respective SLDC’s, the open access applications are then
forwarded to the traders by both buyer & seller.

 Now the trader applies for the open access to the respective RLDC’s.

 All these transactions are done through Fax.

 If the transmission capacity is there in the network, then the application goes through and the
power gets scheduled for the respective Time Slots.
Bilateral Agreements (Scheduling) contd..

 How to decide the price that at what rate you should

buy or sell the power.

 The decisions are mainly taken on the basis of

prevailing UI rates.
 The weather conditions.
Charges
 The trader gets maximum 4 paisa for each unit.

 Wheeling charges are to be born by buyer from the point of delivery by the seller.

 Transmission Charges :- example - Power purchased from MSEB by NDPL

(delivery point – MSEB periphery). Then the transmission charges which have to
paid are
 The link used for power scheduling would be
 MSEB – WR – NR – DTL

 The charges to be paid are 5 + 5 + 3.5 = 13.50 Paise/Unit

 Operating charges :- Rupees 2000 to the respective RLDC

 Scheduling charges : - Rupees 5000 to the respective SLDC

Note:- All the transmission charges, operating charges , scheduling charges are to be
borne by the buyer after the delivery point.
Banking Agreements

 An agreement between two parties in which either of the party agrees to

supply the power to the other party for a specified tenure & as per the
agreement the power is returned back by the consuming party in the
specified time period.
 These type of agreements are also of two types

 Day ahead banking

 Firm Based

 Example :- Say NDPL enters into a banking agreement with Rajasthan,

the power supplied by NDPL in the month of November, December,
January (say 200 MU’s) will be returned by Rajasthan in the months of
April, May, June.
Banking Agreements contd..

 Why to do banking ??

• Delhi is a power surplus state in the winter season.

• As in the winter season the demand is less as compared to summer
season.
• No profit in case of underdrawl because the average UI rate is too
less.
• In summer season huge shortfall to the tune of 250 – 300 MW.
• Nobody is willing to sell the power even at the rate of 10 Rupees/unit.
• Frequency of the grid is worst in the time of summer season.
• Also to keep the average power purchase cost down.
Power Exchange (Indian Energy
Exchange)
What is Power Exchange ? (1/2)
 Competitive wholesale spot trading arrangement that facilitates
the selling and buying of electricity
 It is an organized market that facilitates trade in standardized
hourly and multi-hourly contracts
 Develop marginal cost for its energy transaction – A price index
 Power exchanges are ‘ energy only market’ since they do not
take into account any technical aspects like transmission
constraints or capacity payments.
 Bids on an exchange only contain quantity and prices for a
particular period.
 An exchange is absolutely neutral towards the market because its
rule apply to both sides of the transaction.
What is Power Exchange ? (2/2)
 Power exchange is a voluntary market place
 Competition in an electricity power exchange’s spot market
occurs by generators, distributors, traders and large consumers
submitting bids for buying and selling electricity.
 Each sale bid specifies the quantity and the minimum price at
which they are willing to supply the energy.
 Conversely, each buy bid specifies the desired quantity and the
maximum price at which they are wiling to buy the energy
 The power exchange matches supply and demand along with
publishing a market-clearing price.
 Power exchange have trading rules, which cover the setting of
prices, delivery, clearing , type of product, timing etc.
 The role of a power exchange is to facilitate the trade of short-
term products.
Types of Markets

 Spot Market
Day Ahead Market
 Other types of spot markets

 Financial Market
 Forward Market
 Futures Market
Operations of Indian Energy Exchange

 Main Functions of Exchange

 Self Regulatory Authority.

 Price discovery.
 A contract for Purchase and/or sale of electricity as
prescribed by the Exchange and permitted by CERC.
 All transactions in Contracts shall be cleared, registered and
settled by the Exchange.
 Exchange to prescribe trading days & trading session.
 Exchange to act as a legal central counter party.
 Exchange shall issue a Daily Official List.
Market Place Functionality
Market & Area prices are calculated
Accepted bids are calculated

Information
dissemination

Bids are validated,

accepted and stored

Member Accounts
are updated

Settlement
Bid entry Amounts
are calculated
Day Ahead Market Operations
Invoice/Credit Note

System Operators Sch Clearing

NLDC/RLDCs RTC Power Exchange Bankers
ATC
House
Confirm
Margin Requirement
Submit
Financial
Power bids
Settlement
Trading

Distribution
Trading
Generators Licensees /
Licensees
OA Users
Schedule Debit/Credit
Participants
Auctioned day-ahead market

 Double-sided auction system

 Hourly day-ahead contracts
Demand Supply
(MWh)
Price
 Physical delivery
 Central counter party: IEX
 Equilibrium price for each hour
clearing price (Rs./MWh)
 Hourly volumes/prices published

traded volume Quantity

Timeline for Scheduling & Settlement

TIME DETAILS

Collection of TTC from NLDC/RLDC & display the information on IEX website and also to be
9.00 AM used as an internal input (master) for scheduling.

10.00 AM to 12.00 PM Bid - Call session

11.00 AM Funds pay out pertaining to previous days transaction, margin refund request (if any)

12.00 PM to 12.30 PM Exchange to determine MCP & match the orders.

12.30 PM PROVISIONAL OBLIGATION

Communication to bank to Confirm & block the funds pay in from buyer members settlement
12.30 PM to 1.00 PM account.

12.30 PM to 1.00 PM Communication to TSO for transmission capacity.

Exchange will receive confirmation from bank for availability & blocking of clear balance along
1.30 PM with a note on shortages.

In case if the member brings in funds in his settlement account afterwards (members who were
2.30 PM reported as short), the bank will confirm it to the exchange.

3.30 PM TSO will confirm the transmission capacity

4.00 PM Exchange will generate FINAL OBLIGATION

4.00 PM to 4.30 PM Dispute period

4.30 PM File sent to banks for actual debits

4.30 PM Exchange releases the trades schedule to the NLDC/SLDC

4.45 PM Confirmation file received from bank

5.00 PM NLDC/RLDC will confirm the final ATC & confirm the schedule if any
Day-Ahead Market - hourly contract
specifications
 Product definition 24 separate hour periods throughout the following delivery
day (D).

 Trading system IEX

 When to place orders 10:00AM to 12:00 PM of pervious day (D-)

 Fixing Times 15:00 hrs of D-1 (dispute settlement period: 30 min)

 Minimum Volume 1 MW

 Minimum Volume step 0.1/ MW

 Quotation Method Closed auction (Market clearing price and Market Clearing
Volume calculation) by linear interpolation

 Order Working Trader’s ID, instrument, quantity/ price combination

 Delivery Point Interconnection point of State grid

 Settlement Daily settlement at MCP* volume traded. Final settlement

adjusted for any force majeure deviations
 Tick size Rs. 1/ MW
Who Can become Members of IEX

Entities eligible for Membership:

 Inter-State Generating Stations (ISGS)

 Distribution Licensees

 State Generating Stations

 IPPs connected to ISTS

 CPPs and IPPs

(with consent from DISCOM/SLDC/STU/RLDC)

 Open Access Customers

(with consent from DISCOM/SLDC/STU/RLDC)

 Electricity Traders / Marketers

Thank You