In a bid to adapt to the evolving nature of short term electricity trade, the Indian Energy Exchange (IEX) is planning to introduce new tools for trading power in the spot market.
In a bid to adapt to the evolving nature of short term electricity trade, the Indian Energy Exchange (IEX) is planning to introduce new tools for trading power in the spot market. The new mechanisms, though focussed primarily for renewable energy producers, are expected to provide more flexibility to all the buyers and sellers at the exchange. However, a senior (IEX) official told FE that the new tools are not expected to impact price discovery.
The development comes at a time when BSE, PTC India and ICICI Bank have applied to the Central Electricity Regulatory Commission (CERC) to open the country’s third electricity exchange. Currently power trading at IEX constitute about 5% of the overall electricity generation.
Presently, IEX allows only single bid and block bids in the day ahead market. Single bid allows one to bid for a 15-minute period while block bid is used for the procurement or sale of power for a larger span (such as base load or peak load period).
“Such tools do not cater to the complex constraints of generators, demand pattern of buyers and doesn’t allow the change in quantum of power across the time blocks,” the person said. Such restrictions pose a major disadvantage for renewable generators, where generation timelines depend on the vicissitudes of nature.
Even thermal power plants, which require significant time to ramp-up and ramp-down operations, are not able to enjoy the full benefit of spot markets with the existing bidding mechanisms.
The seven new proposed order types are expected to provide traders the option to optimise their offers and demands according to market requirements and grid availability. As per CERC order, stakeholders would have to send their views on the proposal to IEX by November 23.
With major distribution companies already tying up excessive long-term PPAs to meet their respective demands, increasing share of intermittent renewable energy and rise in industrial open access consumption, share of electricity transactions through spot markets are seen to be rising in the country in the coming years.
While speaking at the launch of IIT Kanpur’s Centre for Energy Regulation (CER) earlier this year, power ministry secretary AK Bhalla had also pointed at the need to introduce derivatives and other trading tools to make the market more vibrant.