Development Of A Common Platform For Electricity Trading CERC Public Hearing Presentation By POWERGRID 19-December-2006

Introduction CERC Staff Paper CERC Staff Paper –Well researched and documented –Created Awareness Building blocks Building blocks –Physical growth of networks »Interstate & Super grid –UI and ABT »Creation of a market »Streamlined at the inter-state level –STOA –Merging of markets A priori to market design A priori to market design –UI –STOA

Short Term Open Access Experience So Far & Lessons Learnt

Growth Of STOA Transactions % + 35 %

Intra & Inter Regional Transactions (Energy MUs)

STOA - Participating Utilities

No. of Transactions: Advance Vs Day Ahead

Approved Volume: Advance Vs Day Ahead (MU)

Applied Energy As % Of Approved Energy (NR)

% Utilization of Advance Reservation (NR)

STOA Utilization In NR: Sep – Nov ‘06 (As % of Approved Energy)

STOA Utilization In WR: Apr – Oct ‘06 (As % of Approved Energy)

Load Curve & STOA (NR) ( )

Load Curve & STOA (WR) ( )

Market Structure - Generation

Market Structure - Load

STOA Experiences An enriching experience An enriching experience 95% applicants successful in getting approval for STOA 95% applicants successful in getting approval for STOA Single Transaction Size Single Transaction Size –Smallest – 1 MW –Largest – 450 MW Maximum transfer 2780 MW on a day Maximum transfer 2780 MW on a day Diversity being gainfully utilized Diversity being gainfully utilized

STOA Experiences Advance Reservation Advance Reservation –Applications received up to 300% of available corridor »Pro rata allotment Volumes Volumes –No. of transactions in day-ahead approx 4 times that in advance reservations –Energy volume in day-ahead approx 10% of that in advance reservations

STOA Experiences Utilization of booked corridor Utilization of booked corridor –About 70% –Put and call options ? –Easy exit - low cost Corridor availability Corridor availability –Peak hours – Corridor available but low volumes –Off peak hours – Corridor & power available Costlier (liquid) generation & captives under utilized Costlier (liquid) generation & captives under utilized Day ahead transactions Day ahead transactions –Serious players

STOA Experiences UI volumes UI volumes –Excessive reliance on UI –Need for a cap on UI volume Exploding size of matrix Exploding size of matrix –Nearly 100 control areas »Implementation of Intra-State ABT –96 time blocks Day ahead – schedules & utilization Day ahead – schedules & utilization –Frequent revisions –Un-utilized corridors, prospective buyers/sellers available –No show at 1500 hrs »Getting streamlined through intervention of Honble’ Commission

STOA Experiences Assessment of Transfer Capability Assessment of Transfer Capability –Weather dependent load –Monsoon dependent Hydro generation –Firmness of maintenance schedules –UI volumes – high uncertainty –Floating frequency band – line flows affected –Frequent large contingencies TTC, ATC, FC ATC, FC SATC, TRM, CBM TTC, ATC, FC ATC, FC SATC, TRM, CBM

STOA Experiences Evils of pro-rata Evils of pro-rata –Advance Booking – E-bidding being avoided –Scheduling –Curtailment on congestion –Problems of SEAMS »Multiple regions and states affected –Reconciliation “If the system operator chooses such tools as pro rata curtailment or bilateral curtailment for line loading relief, they will interfere with economic dispatch.” Steven Stoft, Power System Economics (3-4.5)

STOA Contracts So Far …. ? Advance Contracts – Advance Contracts – –Firm ? –For physical delivery ? –Forwards? –Options »Call ? »Put ? “The day-ahead market is the forward market with the greatest physical implications” Steven Stoft, Power System Economics (3-5)

Procurement Options Long term contracts Long term contracts –Direct –Through traders Short term open access Short term open access –Direct –Through traders UI UI Power Exchange - Another option Power Exchange - Another option Freedom to choose from the alternatives

Four Pillars of Market Design IMBALANCES CONGESTION MANAGEMENT ANCILLARY SERVICES SCHEDULING & DISPATCH ELECTRICITY MARKET Sally Hunt

The Way Forward … Intra state ABT and STOA at state level Intra state ABT and STOA at state level –Regulatory framework at state level –Harnessing of latent generation –Optimal use of embedded generation –Reduce market dominance –Intra State STOA –Management of imbalances within states

The Way Forward … Strengthening of network (state level) Strengthening of network (state level) Indexing of the real time market price (UI Rate) Indexing of the real time market price (UI Rate) –Rationalization a pre-requisite for efficient market functioning Robust financial settlement system Robust financial settlement system Information exchange system Information exchange system –Strong IT infrastructure –Transparency Resource building Resource building

The Way Forward … Market rules that do not compromise with system operator’s responsibility regarding power quality and reliability. Market rules that do not compromise with system operator’s responsibility regarding power quality and reliability. “In the absence of a mature physical system operators fight an endless losing battle” Charles Concordia

Power Exchange Voluntary participation Voluntary participation Double sided auction Double sided auction Uniform pricing Uniform pricing Normative transmission charges, to start Normative transmission charges, to start Normative transmission losses, to start Normative transmission losses, to start No bid caps No bid caps Robust financial settlement system Robust financial settlement system Strong IT infrastructure Strong IT infrastructure Resource building Resource building Organizational issues Organizational issues

“Bilateral markets provide a private coordinating mechanism; Exchanges provide a public, centrally determined market price.” “All except the real time market are financial markets in the sense that the delivery of power is optional and the seller’s only real obligation is financial” Steven Stoft, Power System Economics

Thank You