IEX

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IEX Building Power markets for India
Rajesh K. Mediratta rajesh.mediratta_at_iexindia.com
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Outline

• Power Market design
• Indian Power market
• IEX Day-Ahead Market
• IEX Performance so far
• IEX Term-Ahead Market

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Power Market Design
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Market Models in Power Sector

• Complete Monopoly
• Single-Buyer Model
• Wholesale Competition
• Retail Competition or Direct Access

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Whole Sale Competition
Gen. Co.-1
Gen. Co.-2
Gen. Co.-3
Competition in generation
Transmission a natural monopoly therefore
regulated
Transmission Co.
Distributors can choose who will supply them
(Distributor can buy from any GENCO).
Dist. Co.-1
Dist. Co.-2
Dist. Co.-3
Consumers
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Retail Competition
Competition in Generation
Gen. Co.-1
Gen. Co.-2
Gen. Co.-3
Transmission Natural monopoly
Transmission Co.
Distributors can choose who will supply them
Distributors/ Traders
Distribution A monopoly
Distribution System
End consumer can choose who will supply them
Consumers
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Competition in Electricity Market

• To make electricity market competitive following
  elements are essential
• Several buyers and sellers to avoid exercise of
  market power
• Demand and supply responsiveness to price
• Equal access to essential facilities like
  transmission and distribution
• Liquid and efficient marketplacesMulti-buyer
  multi-seller model
• Open Access both at utility level and consumer
  level
• Competitive procurement for medium-term and
  long-term power
• Development of a vibrant trading platform

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Role of Power Exchange

• A neutral and easy access to the marketplace
• Standardized Contract
• Offers law of One Price
• An automatic interface.
• Clearing settlement of deals
• Security by being a safe counterpart
• Information disemination among the participants

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Benefits of Power Exchange

• Competition
• Various Players
• Reach to larger geographical area
• Reduces the possibility
• Scarcity price enjoyed by sellers in a deficit
  area,
• Unfair consumer surplus enjoyed by buyers in a
  surplus area.
• Liquidity

• Complete marketplace
• Spot market
• real-time balancing market
• forward and future markets
• contracts for hedging risks,
• options
• green power market.
• Efficiency

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Electricity Markets worldwide
Power Market implemented
Courtesy NORD POOL Consultants
Power Market planned/under implementation
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Consolidated Overview
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Success Factors for Power Markets

• Open, free and competitive market
• Sufficient players on both supply and demand
  sides
• Trust in the physical reference on Exchange
• Workable legislation
• Real-time market separated from day-ahead market
• Simple set of minimum rules
• Non-discriminatory access to transmission grid
• Price areas reflect physical network constraints

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Exchanges Self Regulating Institution

• Due diligence before Membership
• Networth Criteria
• Security deposit Margins
• Voluntary participation
• IEX Counterparty
• SLDC Clearance

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Power Market in India
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Indian Power Market
Indian Power Market
Long Term
Short Term
Exchange
PPAs
Bilateral 1 Direct 2 Trader
UI
Day Ahead
Real Time
1.Day Ahead 2. Same day 3. FCFS 4. Upto 3
months 5. Banking

• Intra day
• DAC
• Daily
• Weekly
• Monthly

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Electricity Market Segments
Long-term market (93.17)
Short-term market (6.83)
State Sector generation
Central Sector generation
Pvt Sector Generation
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37
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Short-term Market
Bilateral Market (47.94)
UI (43.15 )
Exchange (8.92 )
Through Traders
Direct Trading
41.17
6.775
As per CERC October MMC Report
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Short-term electricity market
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Introduction to IEX
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Who are we?
Promoters
Joint Equity Partners
Technology
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Tried Tested Global Technology

• NASDAQOMX
• Six Sigma Efficiency
• Error Free operation since inception
• Capable for handling
• Day Ahead Auction
• Term Ahead Bilateral
• Market splitting upto 30 areas
• National, Regional and State level Contract
• RPS Certificates Trading

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Market Development Milestones
2005
IEX Conceptualized PX For
capacity addition
2006

• Created awareness among Stakeholders
• across
  the country

2007

• CERC issued guidelines for setting PX
• IEX got in principle approval

• CERC approved commencement of
• Day Ahead Market

2008
April 2009

• Market friendly regulations
• Week month Ahead market expected

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IEX Market Segments
Day-Ahead Market
Term-Ahead Market (Proposed)

• Matching through Continuous Trade Session
• Intra Day Contracts
• Day-Ahead Contingency
• Matching through
• Call Auction followed by Continuous Trade
  Session
• Daily contracts Weekly Contracts
• Monthly Contracts
• Intra State Contracts

• Matching through
• Auction
• Hourly Contracts

referred as TAM Auction
referred as DAM Auction
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Day-Ahead Market
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Auctioned day-ahead market

• Nation-wide, on-line, automated
• Double-sided auction system
• Hourly day-ahead contracts (MWh)
• Portfolio bids
• Physical delivery based
• Central counter party IEX
• Equilibrium price for each hour (Rs./MWh)
• Hourly volumes/prices published

5 4 3 2 1
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IEX - DAM Product Description

• Trading Platform
• Graphical user interface for the purpose of
  trading
• Order Types
• Hourly Orders
• 1 hour
• Max/Min Price, Volume, Hour
• Different Price-Quantity Pairs
• Partial Execution Possible
• Block Orders
• Consecutive hours during the same day
• Customize block bid allowed

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IEX - DAM Product Description

• Order Characteristics
• Firm commitment to purchase or sell
• Min and Max order price
• Portfolio and Block bids
• Trading Availability
• Every Calendar Day
• Order Entry
• Entry for orders related to Delivery Day (D day)
  possible on D-1 from 1000 hrs to 1200 hrs
• Contract
• Contract Size Minimum 1 MWh
• Minimum volume step 0.1 MWh
• Minimum price step Rs 1 per MWh
• Total Contract Price Order Volume multiplied by
  ACP

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IEX - DAM Product Description

• Finalising Trades
• 24 hour prices at 1500 hrs of D-1 day
• Determine the trades accepted
• Delivery Point
• Periphery of Regional Transmission System in
  which the grid-connected exchange entity, is
  located
• Settlement
• Daily settlement at ACP x Volume traded
• Final settlement adjusted for any force majeure
  deviations
• Security of Transactions
• IEX act as counter party

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Price Calculation Algorithm .each hour
Price (Rs./kWh)
0
1
2
2.1
3
3.1
4
4.1
1.1
2.5
20
Rs/kWh
MW
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Trader Station Single Bid
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Trader Station Block Bid
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Time Line for scheduling of Collective Transaction
1730
1000
1400
1800
1200
1300
1500
RLDCs/SLDCs to incorporate Collective
Transactions in the Daily Schedule
NLDC to confirm acceptance. PX to send files to
SLDCs for scheduling
Market Participants to place their Bids
NLDC to check for congestion. In case of
congestion shall intimate PX regarding to the
period for congestion and available margins
PX to send provisional unconstrained solution to
NLDC and flow on TS as informed by NLDC
PX to send Scheduling Request to NLDC based on
margin specified by NLDC
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Treatment of Losses

• Both Buyers and Sellers to absorb losses
• Buyer
• draw less than Contracted Power
• (Contracted Power losses)
• Seller
• inject more than Contracted Power
• (Contracted Power Losses)
• Average Transmission Losses of the Region where
  the Entity is geographically located
• Additional Losses for Wheeling, if necessary
• To be notified in advance by NLDC
• Only for Injection

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Treatment of Losses for buyer

• NR (Regional) Loss 6
• S1 (State) loss 4.85
• Buyer X bids for 100 mw at its respective
  regional periphery

Bid Volume
Scheduled Drawal lt SLDC Clearance
S1 Loss 4.85
NR Loss 6
X (Buyer)
Maximum Bid Volume in standing clearance
Regional State losses
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Treatment of Losses for seller

• SR (Regional) Loss 6
• A1 (State) loss 4.85
• Seller Y bids for 100 mw at its respective
  regional periphery

Bid Volume
Scheduled Generation lt SLDC Clearance
A1 Loss 4.85
SR Loss 6
Y (Seller)
100 MW at regional periphery
Maximum Bid Volume in standing clearance
Regional State losses
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Clearing Banks

• Exchange empanelled Clearing Banks.
• Automised movement of funds.
• Exchange Members to open settlement account.
• Funds pay in pay out to be done thru such
  settlement account.
• Exchange has the right over Members Settlement
  account.
• Daily reconciliation with Bank.

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Risk Management System

• D-1 At 0930 Hrs Pre-trade Margin Check.
• equal to the initial margins or average of last 7
  days trading value, whichever is more.
• D-1 At 1230 Hrs Preliminary Obligation Margin
  Check
• Preliminary Obligation lt Funds Available (incl
  initial margin)
• Block funds.
• D-1 At 1530 Hrs Pay-ins
• At D1 1400 Hrs Pay-out.

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Congestion Management
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• One fine Sunday every body in Delhi wants to be
  in Connaught Place.
• As a result we will have Traffic jams in roads
  toward CP.

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IEX Bid Areas
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Congestion Management Market Splitting
Courtesy Nordpool Consultancy
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Congestion Management Market Splitting
area 1
area 1 2
area 2
price
price
price
MWh
MWh
MWh
Needed capacity for exchange between the areas in
order to achieve the same price in both areas
Courtesy Nordpool Consultancy
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When Congestion will take place ?
N
E, NE
W
S
S Surplus D Deficit
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Term-Ahead Market
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Contracts Offered
1) Day-Ahead Contingency Intra-day
Delivery day
Delivery day -1
DAM
DAC
Intra day
2) Daily, Weekly Monthly Contract
TRADING
Month 1
Month 2
Month 3
3) Intra-State Contracts
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Trading Procedure
BIDDING
MATCHING

• Anonymous bids
• Auction 0300 PM-0400 PM
• Continuous 0405 PM- 0500 PM
• Regional Contracts
• Minimum volume 1MW
• BID Format
• Firm Contract for RTC power in Aug,09 from ER

• Closed Auction
• Orders accumulated during call phase
• (no matching)
• Orders matched after call period
• Orders are used for calculation of common
  price i.e. Equilibrium Price.
• All successful orders matched at Equilibrium
  Price.
• Continuous Trading
• Price-time priority based continuous
  matching
• The highest Buy order lowest
• Sell order gets the priority
• if the prices are same then priority is
  given to the time of the order received.

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Trading Procedure
SETTELMENT
SCHEDULING

• Selected trades sent to Nodal Agency
• i.e. RLDC of Buyer State.
• Scheduling Procedure as per Procedure
• for Scheduling of Bilateral Transaction,
• issued by CTU
• IEX files an application to the
• concerned RLDC along with the standing
• clearance already provided by the Buyer
• and seller

• Reservation of transmission
• capacity by Nodal RLDC.
• Issue of Schedules by concerned
• RLDCs on daily basis
• Financial Settlement by IEX.

Similar to Bilateral Markets
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(No Transcript)
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Performance so far
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Increase in Participants (till 30th June, 09)
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IEX Performance so far

• Wide-ranging participation across the nation
• 23 states 3 UTs
• 118 portfolios
• Smooth Coordination with System Operators
• Adequate Liquidity (June08-30th June,09)
• 3.79 BUs Cleared Volume (single side)
• Rs 3,173Crs Turnover
• All time high of
• 26.43 MUs (20th June,09)
• 27.08 MUs unconstrained (1st April 09)

PXI
PXI
IEX
IEX
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Nationwide acceptance
Total Participants 150
State Utilities
CPP
Green Power
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DAM Demand Supply Gap
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IEX Score (till 30th June, 09)
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IEX Hourly MCV MCP( May 2009)
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IEX Hourly MCV MCP( June 2009)
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IEX Membership Category

• Proprietary Member ()
  Professional Member
• (right to trade and clear on its own account)
  (trade and clear on his own account
  on behalf of its Clients)
• Generator
• Distribution licensees
• IPPs, CPP MPPs
• Open access consumers
• 
  
  
• 
  
  
  

• Electricity Trader
• Financial Brokers

Grid-connected Client ()
Trader Client
(is eligible to trade in electricity under the
Electricity Act, 2003 and has a legally valid
power purchase/sale agreement, which gives the
Client the right to purchase and sell electricity
)
(eligible to buy or sell electricity and is
connected to the grid.)

• Generator
• Distribution licensees
• IPPs, CPPs MPPs
• Open access consumers

Denotes that foll. Entities requires Standing
Clearance from SLDC
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New Avenues opening up

• Green Certificates
• National Renewable Energy Law being prepared
  by GoI
• Facilitate trading in Renewable Energy
  Certificates
• White Certificates
• Blueprint by MoP under National Action Plan
  for climate change
• Trading in Energy savings

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IEX Initiatives Continuous
communication with Users

• IEX Daily SMS Service for Trade Details

IEX Monthly Bulletin
IEX hourly Trade Prices displayed on its
website
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