Developing power exchange(s) in India: Issues and Challenges

The introduction of open access for inter-state transmission as per the new electricity legislation in India has facilitated bilateral trading resulting in better resource optimization within an over all deficit scenario. While the volume of traded electricity is tiny compared to the total consumption, nonetheless it has electrified an otherwise grim scenario. As a result, the Indian power sector has started at tracting private investment in hydro and thermal generation at an unprecedented scale.

With a view to further develop the electricity market, the Central Electricity Regulatory Commission (CERC) has recently issued guidelines for setting up Power Exchange(s). The authors have identified various challenges that lie ahead in operationalization of Power Exchanges in India but they may be relevant to other countries as well. In their opinion, the existence of a unique real time frequency linked Unscheduled Interchange mechanism coupled with the fact that Power Exchanges will be voluntary platforms with double sided auction, may obviate need for an elaborate market monitoring. Despite the law, there is a resistance of Open Access at the Intra-State level and authors feel this can be over come by the joint efforts of the Regulators, Governments and Power Exchange Developers. The authors have focused on providing solution to the technical challenges, namely coordination among system operators, congestion management, application of transmission charges and losses for PX trade which they feel are the most critical issues at this juncture. In India, Power Exchange(s) and system operators would be separate legal entities. Further, there are separate system operators as State, Regional and National level. This makes simultaneous clearance of trading transactions and requisite transmission capacity a challenging task. The Paperproposes a coordination process among stakeholders for implementing ‘single-window clearance’ with coordination among various system operators for scheduling and congestion management. The paper suggests simple and reasonably predictable method to overcome the challenge of applying transmission charges and transmission losses to bilateral and Power Exchange based multilateral transactions.

The authors discern that the creation of PX(s) has the potential to unshackle the electricity supply industry by promoting investment, harnessing captive generation and better optimization of resources provided the technical challenges are resolved in a simple and practical manner as suggested in this paper.