Comments on CERC’s Staff Paper: Developing a Common Platform for Electricity Trading S. A. Khaparde, A. R. Abhyankar and V. Sarkar Indian Institute of Technology Bombay

Topics of suggestions Congestion Management Issue of congestion surplus Utility of market splitting under meshed network situation Transmission Pricing Compatibility of PX transmission costs with those of bilateral trades Ex-ante or ex-post? Point-of-connection (POC) scheme

Suggestions related to Congestion Management

Proposed approach for handling congestion surplus Area A (2000Rs/MWh) Area B (3000Rs/MWh) 100 MW 50 MW 150 MW 50 MW

Proposed approach for handling congestion surplus (con..) Original pricing rule: Generator at area A is paid a price of 2000Rs/MWh Load at area A pays a price of 2000Rs/MWh Generator at area B is paid a price of 3000Rs/MWh Load at area B pays a price of 3000Rs/MWh ISO collects a net congestion surplus of Rs/h

Proposed approach for handling congestion surplus (con..) Proposed pricing rule: Generator at area A is paid a price of 2000Rs/MWh Load at area A pays a price of 2000Rs/MWh Generator at area B is paid a price of 3000Rs/MWh Load at area B pays a price of (50* *2000)/150= Rs/MWh ISO collects a net congestion surplus of 0 Rs/h

problem of power mixing Area A (2000Rs/MWh) Area C (3000Rs/MWh) Area B (2200Rs/MWh) 100 MW 80 MW 200 MW 100 MW Area D (3500Rs/MWh) 70 MW 120 MW 70 MW 100 MW 180 MW 200 MW 130MW

Problem of power mixing (con..) Area ‘A’ & ‘B’ are generation surplus areas Area ‘C’ & ‘D’ are generation deficit areas 100 MW from area ‘A’ and 50 MW from area ‘B’ are mixed first to form a net surplus amount of 150 MW. Areas ‘C’ and ‘D’ get shares in this mixed amount in a ratio of 8:7 It can’t be immediately determined how much power is delivered from a sending end area to a receiving end area Therefore an additional tie-breaking strategy is required to implement the proposed method Principle of proportional sharing may be adopted for the purpose of tie-breaking

Compatibility of Nord Pool version of area pricing with Indian system Nord Pool approach of market splitting considers only area power balance and inter-zonal capacity limit constraints This approach is mainly applicable to a radial system where removal of any inter-zonal link separates the original system into two totally disconnected systems In case of a radial system, for a certain zonal injection and withdrawal pattern, power balance equations give a unique solution to the inter-zonal flows However, for a meshed system, Nord Pool approach may lead to multiple solutions Unfortunately, our system is a meshed system

Structure of the Indian system NR WR SR ER NER

Structure of the Indian system (con..) Three loops are there in the system NR-WR-SR-ER NR-WR-ER WR-SR-ER There is no synchronous loop in the current system However, an additional tie breaking strategy is to be designed to distribute the net incoming or outgoing flow of each of the regions NR, WR, SR & ER over the corresponding interfaces In presence of synchronous loop, Nord Pool approach will fail!

Our proposal To go for a direct OPF based congestion management mechanism considering regions as nodes Joint clearance of power exchange and bilateral trades for a better utilization of transmission resources Financial transmission rights to give financial security to bilateral traders Setting up curtailment priority among the bilateral trades by means of transmission service request mechanism

Suggestions related to Transmission Charges

Compatibility of PX transmission costs with bilateral trades It is not clear whether the transmission charges for PX in Rs/MW/Hour would be comparable with prevailing long term rates or short term rates? The staff paper mentions that the usage of pre-assigned transmission capacity by PX on inter-regional corridors shall be ‘akin’ to long term usage. If this is so, whether, the charges would be comparable with long term rates?

Compatibility of PX transmission costs with bilateral trades (con..) We believe that the PX trades and short term bilateral trades would act as two parallel activities for sale and purchase of power. It is expected that the PX would help the price discovery for bilateral transactions This would hold true only if the entities involved in both mechanisms are subjected to common transmission prices Common platform for transmission capacities mandates common platform of its pricing The transmission charges for PX trades and short term bilateral trades should be comparable

Ex-ante or Ex-post? No specific details about socializing total transmission cost among the participants are given in the staff paper Ex-post scheme of transmission usage charge Members of PX would come to know about their share in transmission cost, only after market clearance If the costs are made distance based or direction sensitive (rightly so!), then participants are exposed to vagaries of transmission charges Socializing transmission costs does not necessarily mean assigning charges based only on MWs traded

Our Suggestions The transmission pricing scheme should be ‘ex-ante’ The transmission charges should be sensitive to distance and topology of the network This gives rise to appropriate price signals for generator and load investments The ‘point-of-connection’ (POC) transmission tariff provides a good solution to the above problem

Point-of-Connection (POC) Scheme The payment at one point, the point of connection, gives access to the whole network system, and thus the whole electricity market place Single charge in Rs/MW/Hr, depending upon the level of connection Real power tracing can be employed to arrive at point charges in POC tariff Tracing results are topology dependent and hence give rise to spatially variant price signals POC scheme can be applied to both, i.e., PX trades and short term bilateral transactions

Thank You