Open Access in interState Transmission

1
Department of Industrial and Management
Engineering
Indian Institute of Technology Kanpur
2nd Capacity Building Programme for Officers of
Electricity Regulatory Commissions 3 8 August,
2009
Open Access in inter-State Transmission S. K.
Soonee
Forum of Regulators
2
Presentation Outline

• Introduction
• Indian Power Market An overview
• Short-Term Open Access
• Bilateral Transactions Experience so far
• Collective Transactions Experience so far
• Learning from past experience
• Key Success Factors
• Future Possibilities

3
Market Architecture

• Settlement System
• Single Part
• Multi-part
• Day Ahead Market
• Real Time Market
• Ancillary Services Market
• Derivatives (Financial)

4
Market Structure

• Reliability Requirements
• Transmission
• Demand Elasticity
• Long-term Contracts
• Supply Concentration

5
Good Market Design

• Objective
• Efficient Reliable production of electricity
• Short-run elements ( least-cost daily production)
• Long-run elements (induce efficient investment
  decisions)
• Identifies Critical Issues
• Address them as Simply as Possible, but not more
  simply
• Understand the Preference and Constraints of
  Market Participants
• Pricing Rule affects behavior of Market
  Participants
• Poor electricity market design are result of
• Attempt to oversimplify the problem e.g. Use of
  single part settlement rather than multi-part
  settlement

Electricity Market Design The Good, the Bad, and
the Ugly By Peter Cramton
6
Indian Power Market An Overview
7
August 2006 North synchronized With Central Grid
Five Regional Grids Two Frequencies
March 2003 West synchronized With East
Northeast
NEW Grid
October 1991 East and Northeast synchronized
South Grid
Central Grid
MERGING OF MARKETS
North
East
West
Northeast
South
Installed Capacity 149 GW
Five Regional Grids Five Frequencies
8
INDIAN ELECTRICITY MARKET
9
Evolution of Power Market in India
Financial Derivatives
Capacity Market
Ancillary Market
Power Exchange 2008
Open Access 2004
Settlement System 2002-03
Grid Code Feb.2000
10
Market Design
Four Pillars of Market Design
ELECTRICITY MARKET
IMBALANCES
CONGESTION MANAGEMENT
ANCILLARY SERVICES
SCHEDULING DISPATCH
Making Competition Work in Electricity, Sally
Hunt
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Balancing market guiding vector
Deficit
Surplus
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UI mechanism

• Maximizes social welfare
• Transparent, neutral rigging proof
• Diffuses market power
• Ultimate open access
• Facilitates reforms in the sector
• Encourages trade and bilateral exchanges
• Facilitates exchanges (arbitrage) between
  regional power pools

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Open Access in Inter-state Transmission
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Short-Term Open Access in inter-State Transmission

• Implemented w.e.f. 6-May-2004
• Products
• Monthly bilateral
• Advance
• First Come First Serve
• Day ahead bilateral
• Collective Transactions through Power Exchange
• Intra day bilateral
• Permits usage of spare transmission capacity
  through a transparent process
• Offers choice and freedom to buy sell power

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Open Access Regulations, 2008

• Categories of Transactions
• Bilateral
• Collective Transactions discovered on a Power
  Exchange
• Nodal Agency
• Bilateral RLDCs
• Collective NLDC
• Transmission Charges
• Shift from Contract Path to Point of
  Connection
• Both buyers and sellers to pay
• Transmission Losses
• Applicable on both buyers and sellers
• Thrust on empowerment of SLDCs
• Groups of buyers and groups of sellers

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Time Line
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Trade under Short-Term Open Access
2008-09 data includes Bilateral Collective
transactions.
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lt--Introduction of Day-Ahead Product from
April,2005
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ENERGY APPROVED(MU) - (Nodal RLDC-NRLDC)
2007-08
2008-09
2005-06
2006-07
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SOUTHERN REGION ENERGY APPROVED(MU)
2008-09
2007-08
2006-07
2005-06
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MULTIPLE POWER EXCHANGE OPERATION Experience so
far
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Exchange vs. OTC Contract
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Interplay PX Bilateral Markets (OTC)

• Rivals
• Competition between two types of markets
• Complementary
• Competition limited to day-ahead
• Preference to OTC in longer time frame
• Inter-dependent
• Prices on the PX OTC must be very close else
  arbitrage occurs
• Hedging

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Salient Features of PX Implementation

• Voluntary participation
• Day ahead
• Energy only
• Physical delivery only
• Double sided bidding
• Hourly bids
• Uniform pricing
• Multiple exchanges
• Congestion Management using Market Splitting

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Treatment Of Losses

• Average transmission losses of the respective
  region to be applied, both on Buyers and Sellers
• Sellers to inject extra power (MW) in addition to
  contracted power (Contracted Power Losses)
• Buyers to draw less power (MW) than contracted
  power (Contracted Power Losses)
• Applicable losses to be declared in advance
• Intra-State losses to be taken care of by the
  respective SLDCs
• Additional losses for wheeling, if necessary
• To be notified in advance by NLDC
• Applicable only for Injection

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Congestion Management
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SKEWED LOAD GENERATION BALANCE
Skewed Load-Generation Balance

• Scenarios
• 4S
• 3S 1D
• 2S 2D
• 1S 3D
• 4D

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FLOWGATES
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Congestion Management Bid Area
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Real Time Congestion Management

• Curtailment
• By RLDCs at the periphery of Regional Entities
• SLDCs to further incorporate this curtailment
  for State Utilities/Intra-State Entities
• Curtailment actually done for the first time on
  20th May 2009 due to congestion in NR Import

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Discovery of Multiple Prices Interplay

• Prices discovered in Power Exchange
• Reflection of anticipated demand-supply position
  for the next day
• Multiple Prices
• Collective Transactions
• Two prices one for each exchange
• Two Grids two UI Prices
• In case of congestion, market split
• Area prices
• Multiple exchanges

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Congestion Management in Multi Exchange Scenario
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Multiple Power Exchange Operation

• First Power Exchange 27th June 2008
• Indian Energy Exchange
• Promoters Financial Technologies (India) Ltd.,
  MCX, PTC.
• Key partners/investors IDFC, Adani Enterprises,
  Reliance Energy, Lanco Infratech, REC, and Tata
  Power Company
• Second Power Exchange 22nd October 2008
• Power Exchange of India (PXI)
• Promoters NSE, NCDEX
• Equity Partners Power Finance Corporation,
  Gujarat Urja Vikas Nigam, JSW Energy, GMR Energy,
  Jindal Steel Power
• Third Power Exchange in the offing
• Promoted by NTPC, NHPC, TCS

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Congestion Management in Multi Exchanges Scenario
(1)

• ISSUE Sharing of available margins
• Methods
• Priority Based Rules
• Lowest MCP
• Highest MCV
• Highest MCP X MCV
• Maximization of Social Welfare, consumer surplus,
  etc.
• May not lead to an overall economy

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Congestion Management in Multi Exchanges Scenario
(2)

• Explicit Auctioning amongst Exchanges
• Inter-dependencies in the Indian scenario
• Difficult to implement
• Merging of bids obtained by each Power Exchange
• Equivalent to system operator interfacing with
  only one Exchange
• Confidentiality issues

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Congestion Management in Multi Exchanges Scenario
(3)

• Pro rata rationing of available margins
• Simple to implement
• Sub-optimal method
• Possibility of over-estimation of capacity
• Further complications
• Arising out of inter-dependencies in the Indian
  scenario

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Implementation in India

• Worldwide, one Power Exchange dealing with
  physical delivery in one market
• Pro-rata sharing of available margins
• Applied on cleared trade volumes on each area and
  each corridor
• Interim arrangement
• Debate on for a more optimal method

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Case Study

• No congestion till onset of severe winter
• Occasional congestion after 12th Dec 08
• Foggy conditions in Talcher area
• Case of 12th Dec 2008
• Period of Congestion 0500 0600 Hrs
• Congested Corridor Total import to SR
• TTC to SR reduced from 4000 MW to 3600 MW
• Total provisional requisition 1430 MW
• Total trades cleared 1091 MW
• Market split into NEW Grid and SR Grid
• MCP IEX website
• NEW Grid Rs. 4.80 per kWh
• SR Grid Rs. 6.00 per kWh
• Cost of Transmission discovered
• Rs. 1.20 per kWh

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Volume Change During Congestion
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Marginal change in importing region but
considerable change in exporting region
Difference in Market Prices will depend upon
where the Demand and Supply curve are
intersecting each other..
Considerable change in both importing region and
exporting region
Marginal change in exporting region but
considerable change in importing region
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Unconstrained Price volume
Say, If this bid in export area than this bid
will be selected in constrained solution.
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Market Clearing Price (MCP) - Volatility
Source Website of Indian Energy Exchange (IEX)
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Price Vs Volume (IEX)
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Price Duration Curve (IEX)
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Volume Cleared at Different Prices (IEX)
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Correlation Price and Shortage/Surplus
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Landmarks Both PX

• Maximum Volume Cleared (Region-wise)
• Buy (MW)
• AR 150, NR 1223, WR 650, SR 1968, ER
  200
• Sell (MW)
• AR 165, NR 1131, WR 907, SR 597, ER 765
  
• Maximum Volume Cleared
• IEX
• 1968 MW on 22- Nov-08
• 26.44 MU on 27-Jun-09
• PXI
• 384 MW on 26-Jun-09
• 7.07 MU on 1-Mar-09
• Combined (IEX PXI)
• 31.98 MU on 27-Jun-09
• Total Energy Transacted through PX Between 27th
  June 2008 and 7th July 2009
• IEX 3.92 BU
• PXI 0.25 BU
• Total 4.17 BU
• Highest Buy on any day (IEX)

Data taken for the period 28-June-08 to 7-July-09
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Learning's from the experience

• Revision of Schedules
• Contract ? Options
• Evils of Pro-rata
• No Show Use it or loose it
• Behavior of Market Participants changes with
  Market Rules
• Single part Vs Multi-part settlement
• Separation of Content and Carriage

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Key Success Factors

• Control area demarcation boundary metering
• Robust transmission system
• Assessment of Transfer Capability
• Balancing mechanism
• Methodology for transmission charge sharing
• Treatment of transmission losses
• Streamlined scheduling and settlement mechanism
• Transparency and non-discriminatory
  implementation
• Compliance
• Dispute redressal mechanism
• Congestion management

57
Market Development
Derivatives
Exchanges
OTC Markets
Market Maturity
Spot/ Auction Mkt
Individual B S
Time
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Issues .

• Transmission Pricing
• Transmission Losses
• New Actors in the market
• Aggregators
• Professional Members
• Changing Role of Traders
• Energy to Capacity
• Capacity Market
• Issues
• Right time -?

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Larger the footprint Larger the complexities
involved.
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Thank you

• sksoonee_at_powergridindia.com
• sksoonee_at_gmail.com