Charging Up: Impressive beginning for real-time power market

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Published: June 15, 2020 5:00 AM

The RTM system provides more operational flexibility to thermal power producers, who can sell additional power in the spot market when power distribution companies (discoms) procure lower volumes of electricity than what was scheduled by them.

To their benefit, discoms now also have the option of buying power through RTM when renewable sources are not able to supply as promised due to the vagaries of nature.To their benefit, discoms now also have the option of buying power through RTM when renewable sources are not able to supply as promised due to the vagaries of nature.

Electricity trading through the newly launched real-time market (RTM) has gained instant traction, with nearly 140 million units (MUs) having been transacted in the first twelve days since its launch. The new platform is seen to help the growth of power transactions via exchanges, widening the scope for consumers to buy power at market-determined rates, sans long-term contracts

The RTM system provides more operational flexibility to thermal power producers, who can sell additional power in the spot market when power distribution companies (discoms) procure lower volumes of electricity than what was scheduled by them.

To their benefit, discoms now also have the option of buying power through RTM when renewable sources are not able to supply as promised due to the vagaries of nature.

RTM provides 48 auction windows throughout the day on the power exchange platforms providing an opportunity to gencos and discoms to reduce reliance on trades based on the deviation settlement mechanism (DSM), and instead opt for the competitive trade in the open market. The current daily average RTM volume of 11.6 MU is much lower than the 70 MU of electricity traded through DSM every day, leaving a significant scope for further growth in the immediate future. The average power price discovered through DSM is around Rs 3/unit, whereas the average price in the first twelve days of RTM trade has been around Rs 2.11/unit.

Out of the total electricity generation in the county, about 88% is transacted through long-term power purchase agreements, 5% through traders and bilateral transactions between discoms, 2% through the DSM mechanism and the balance 5% on power exchanges.

“Considering a Rs 0.50/unit saving under RTM trading against DSM and assuming a 50% transition in procurement from DSM to RTM in the near to medium term, the annual savings for discoms and open access consumers is estimated to be Rs 550 crore,” Sabyasachi Majumdar, senior vice-president at Icra, said. Experts see prices to remain subdued in the near term, given the surplus capacity scenario and muted demand growth.

However, stakeholders want some fine-tuning of RTM, such as relaxed payment norms, to make the mechanism more sustainable in the long run. “Since trading is done here 24X7, settlement of payments three times a day makes it a cumbersome process and there should be some flexibility provided in this regard,” Ganesh Srinivasan, CEO at Tata Power Delhi Distribution, told FE. Also, power systems operators are yet to decide on the best method to allocate transmission corridors for these spot transactions to avoid network congestion without compromising the security of the grid. Though it has been mandated that power plants selling power through ‘cost plus’ basis will have to share the gains made from RTM transactions with discoms, regulatory clarity has been sought about the ways of calculating such profits.

Currently, the most popular form of spot power transaction is the day-ahead-market mechanism where discoms bid for power supply for the next day. For RTM, the time of delivery is just over an hour. “Earlier regime of managing the grid by load shedding due last minute changes can be easily avoided,” Union power minister RK Singh said while formally launching RTM trading earlier this month. RTM was scheduled to kick off from April 1, but was deferred due to the Covid-19 pandemic outbreak. Trading in RTM commenced in power exchanges from June 1.

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