Distribution Power Trading

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 Peak Met Peak Deficit

: : :

1,08,866 MW 90,793 MW 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

BU

AvailabilityRequirement 739 766 770

766

Actual Demand Demand MetDemand Peak 108 90 110

765

105

760 755

100

750

95

GW

BU 745 740

108

90

90

739

735

85

730

80 Actual Demand

725 Availability

Requirement

Demand Met

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/ Exporting Utility

Trader

Transaction margin retained by trader

POWERGRID (CTU) or STU Contract Power flow Payments

Purchasing Utility

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 Mus

FY03 1617

FY04 FY05 FY06 FY07 4178 11029 11847 14188 20963

25000

20963

20000 Mus

15000 10000 5000

1617

11029

11847

FY04

FY05

14188

4178

0 FY02

FY03

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

Energy Charge (paise /Kwh) = Frequency(Hz) = UI Rate (Paise /Kwh)=

Generating Station A B 96 72 50.26

50.32

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 overdrawl



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 Declaration

10:00 11:00

Entitlements

15:00

Requisition & Bilateral Agreements

17:00 22:00 23:00

I S G S

Injection Schedule Revision in DC Final Injection Schedule

Revisions during Current day

R L D C

Drawal Schedule Revision in Requisition Final Drawal Schedule

Revisions during Current day

S L D C

Scheduling at State level S T A T E

ENTITLEMENTS

DC

REQUISITION INJECT SCH

DRAWL SCH

GEN

R L D C S T A T E IPP

ISGS SHARES REQUISITION DRAWL SCH

S L D C

Entitlements of Discos In ISGS & State Gen Worked out by SLDC

ENTITLEMENTS

DC

REQUISITION DRAWL SCH

INJECT SCH

D I S C O M

D I S C O M

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)  Strict

merit 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 demandsupply gap



Rate depends on demand-supply gap- efficient market.



Encourages trading agreements to hedge risk of UI charges

ABT Implementation  Western

Region  Northern Region  Southern Region  Eastern Region  North-Eastern Region

-

1.07.2002 1.12.2002 1.01.2003 1.04.2003 1.11.2003

Impact Of ABT- Genco 

Advanced control & monitoring systems to closely monitor ex-bus output of plant 





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 



Generation should closely follow 15-minute schedule

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  Bilateral

Agreements  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/ Exporting Utility

Trader

Transaction margin retained by trader

POWERGRID (CTU) or STU Contract Power flow Payments

Purchasing Utility

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 shortterm 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

Bid entry

Settlement Amounts are calculated

Day Ahead Market Operations Invoice/Credit Note

System Operators NLDC/RLDCs

Sch RTC ATC

Power Exchange

Clearing

Bankers

House Submit bids

Power

Financial Settlement

Confirm Margin Requirement

Trading

Generators Schedule

Distribution Licensees / OA Users

Participants

Trading Licensees Debit/Credit

Auctioned day-ahead market

 

Price

Demand

Supply

  

clearing price 

traded volume

Quantity

Double-sided auction system Hourly day-ahead contracts (MWh) Physical delivery Central counter party: IEX Equilibrium price for each hour (Rs./MWh) Hourly volumes/prices published

Timeline for Scheduling & Settlement TIME

DETAILS

9.00 AM

Collection of TTC from NLDC/RLDC & display the information on IEX website and also to be 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

12.30 PM to 1.00 PM

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

12.30 PM to 1.00 PM

Communication to TSO for transmission capacity.

1.30 PM

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

2.30 PM

In case if the member brings in funds in his settlement account afterwards (members who were 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



Order Working

Trader’s ID, instrument, quantity/ price combination



Delivery Point

Interconnection point of State grid



Settlement



Tick size

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

Daily settlement at MCP* volume traded. Final settlement adjusted for any force majeure deviations 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