For Public Use

Leveraging trading through energy exchange

Rajesh K MedirattaDirector (Business Development)

Rajesh.mediratta@iexindia.com1

• 25-year PPA - Tariff on cost-plus or competitive bidLong-term

• 3 Month- 3 Years • Tariff covers : Fixed Cost + Variable Cost+ Mark Up

(< long term) Medium Term

• Intraday- 3 Months to be procured through competitive bidding only

• Single tariff covering Tariff covers Fixed Cost+Short Term (OTC)

• Highly liquid and transparent marketplace• More accurate load management

Day-Ahead Market

• Last-minute adjustments (Gate closure 4 hours)• Less liquid

Intra-day

Discom’s Options For Power Procurement 2

India Power Sector I Present Market Segments

Source: CERC MMC Report

Long Term Short Term

Long-term Power Purchase Agreements

(PPA)

Over the Counter Bilateral Trade

Agreements (OTC)Effected by Licensed

traders

Deviation settlement/Unscheduled Interchange

89.7% 4.8% 3.5% 2.0%

Exchanges (Only up to 11 days) Day Ahead Contingency DailyWeekly Day Ahead Market

Short Term Power market is at ~10%, Power Exchange volume in the segment have been growing significantly

Up to 25 years OTC:Intraday to 1 year

Exchanges: Intraday – 11 days Real Time

1,157,938 MU

1,038,708 MU 55,980 MU 40,032 MU 23,218 MU

All values for FY17

3

Share of Short Term Market in Total Generation

25 21 19 21 23

1517

16

2421

24

31 29

35

41

36 35 35 3534

0

5

10

15

20

25

30

35

40

45

FY12-13 FY13-14 FY14-15 FY15-16 FY 16-17

Volu

me

(BU

)

UI/DSM Direct Exchange Bilateral (trader)

Share in TotalGeneration 10.9% 10.4% 10.3%10.9% 9.5%

Source: CERC MMC Reports

• Short term market grew at a rate with a CAGR of 9% (FY-10 to FY 17).• Power Exchanges witnessed growth at a CAGR of 28% (FY-10 to FY 17).

4

PRICE AND VOLUME TREND IN THE POWER MARKET

5

IEX Market Segments

Day-Ahead Marketsince June,08

• Delivery for next day• Price discovery: Closed , Double-sided Auction

Term-Ahead Contracts since Sep’09

• For delivery up to 11 days• Daily Contracts, Weekly Contracts

Renewable Energy Certificatessince Feb’11

Energy Saving Certificatessince 27th Sept’17

Intraday Market & Day-Ahead ContingencyRound the clock since Jul’15

• Intraday: For Delivery within the same day• Day Ahead Contingency: Another window for next day• Gate closure : 3 hours

• Green Attributes as Certificates• Sellers : RE generators not under feed in tariffs• Buyers: Obligated entities; 1MWh equivalent to 1 REC

• 1 ESCert = 1 mtoe (metric Tonne of Oil Equivalent)• Trading Session on every Tuesday of the Week• Trading time 1300 hrs to 1500 hrs

Auction Continuous

6

Price Comparison of a typical day

0.00

1.00

2.00

3.00

4.00

5.00

6.00

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Pric

e (R

s/kW

h)

15 min time block

Winter Summer

7

Winter: 18/12/2016 | Summer: 15/04/2017

High Liquidity in Volume at IEX(Avg. Hourly Volume in MW)

1,13

0

1,33

4

1,91

9

2,84

2

4,45

6

4,73

7

4,94

2

4,90

7

5,44

5

698

1,30

2

2,37

1

2,53

9

3,95

6

5,74

1

4,68

9

6,43

4

8,80

6

394

704

1,34

7

1,57

1

2,55

4

3,30

2

3,21

2

3,87

8

4,54

1

7.23

5.19

3.56 3.54 3.49

2.80

3.51

2.732.41

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

MCP

(Rs.

/kW

h)

Avg.

Hou

rly V

olum

e (M

W)

Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) MCP (Rs/kWh)

Data as on 31st Mar’ 2017

8

Monthly Market Snapshot (DAM)- Average hourly MW

2.772.92

2.59 2.49

3.13

4.09 4.08

3.55

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

April May June July August September October November

MCP

(Rs/

kWh)

Aver

age

Hou

rely

Vol

ume

(MW

)

Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) Price (Rs./kWh)

9

Daily Purchase and Sell bid trend November

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

1/11

/201

7

2/11

/201

7

3/11

/201

7

4/11

/201

7

5/11

/201

7

6/11

/201

7

7/11

/201

7

8/11

/201

7

9/11

/201

7

10/1

1/20

17

11/1

1/20

17

12/1

1/20

17

13/1

1/20

17

14/1

1/20

17

15/1

1/20

17

16/1

1/20

17

17/1

1/20

17

18/1

1/20

17

19/1

1/20

17

20/1

1/20

17

21/1

1/20

17

22/1

1/20

17

23/1

1/20

17

24/1

1/20

17

25/1

1/20

17

26/1

1/20

17

27/1

1/20

17

28/1

1/20

17

29/1

1/20

17

30/1

1/20

17

Pric

e pe

r uni

t

Mill

ion

Uni

ts

Purchase Bid Sell Bid Cleared Volume Price

10

0.00

1.00

2.00

3.00

4.00

5.00

6.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

Pric

e pe

r uni

t

Mill

ion

Uni

ts

Purchase Bid Sell Bid Cleared Volume Price

Daily Purchase and Sell bid trend October

11

Monthly Average Market Clearing Price (Rs/kWh)

2.68

2.62 2.562.74 2.82

3.68

3.03

2.67 2.56 2.52

2.30

2.612.91

2.32 2.312.16 2.17

2.43 2.462.32 2.32

2.50

2.54

2.56

2.772.92 2.59

2.49

3.13

4.09 4.08

3.55

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Avg. MCP FY15-16: Rs 2.73/kWhAvg. MCP FY16-17: Rs 2.42/kWhAvg. MCP FY17-18: Rs 3.20/kWh

Data as on 30th Sept 2017

12

15 min price trend on 11th December 2017 (Monday)

Even within the day, prices @ night are much lower, providing opportunities to the Discomsto utilize the market

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

00:0

0 - 0

0:15

00:4

5 - 0

1:00

01:3

0 - 0

1:45

02:1

5 - 0

2:30

03:0

0 - 0

3:15

03:4

5 - 0

4:00

04:3

0 - 0

4:45

05:1

5 - 0

5:30

06:0

0 - 0

6:15

06:4

5 - 0

7:00

07:3

0 - 0

7:45

08:1

5 - 0

8:30

09:0

0 - 0

9:15

09:4

5 - 1

0:00

10:3

0 - 1

0:45

11:1

5 - 1

1:30

12:0

0 - 1

2:15

12:4

5 - 1

3:00

13:3

0 - 1

3:45

14:1

5 - 1

4:30

15:0

0 - 1

5:15

15:4

5 - 1

6:00

16:3

0 - 1

6:45

17:1

5 - 1

7:30

18:0

0 - 1

8:15

18:4

5 - 1

9:00

19:3

0 - 1

9:45

20:1

5 - 2

0:30

21:0

0 - 2

1:15

21:4

5 - 2

2:00

22:3

0 - 2

2:45

23:1

5 - 2

3:30

Market Clearing Price 11-12-17

MCP

Power in night hours available below Rs 2.5/unit

13

‘SMART’ Options with Distribution Companies

SMART CONTRACTING

SMART PROCUREMENT

Ensuring ideal mix of long term and short term power purchase

arrangements to manage fixed cost and manage availability of supply

On a day to day basis- managing demand of the area by utilizing cheaper short term

sources by replacing power from high variable cost plants and ensuring MERIT

order based dispatch

Commercial decision-making

14

1. SMART Procurement• Under long term & medium term PPA : two part tariff

• Capacity charges (commitment charges): paid irrespective of whether discompurchase power from these plants or not

• Energy charges : Paid corresponding to the number of units of power purchasedfrom that particular plant

• Discoms can replace costlier long term power by procurement from IEX, if,• Energy charge of power plant is greater than IEX rates• During night hours prices at IEX are further low and savings can be enhanced

• Discoms can replace ISGS first, keeping import constraint in consideration

• Discoms can continue paying fixed charge to Long Term PPAs and substitutewhere energy charge is higher than IEX price

15

PPA 1 I 3.70

PPA 2 I 4.06

Long Term Contracts

Bilateral Contracts Exchange

Capacity Tied up by Discom

IEX Price I 2.45

Merit Order Baseline

PPA 3 I 3.00

PPA 4 I 1.99

PPA 5 I 2.00

PPA I Variable Cost

Must Run Plants(includes all hydro, nuclear or

other ‘take or pay’ type contractual plants)

Contract 1 I 4.70

Contract 2 I 3.50

Contract 3 I 2.10

Merit order dispatch schedule to be prepared based on Variable cost and considering Exchange Prices

16

PPA 1 I 3.70

PPA 2 I 4.06

IEX Price I 2.45

PPA 3 I 3.00

PPA 4 I 1.99

PPA 5 I 2.00

Must Run Plants(includes all hydro, nuclear or

other ‘take or pay’ type contractual plants)

Contract 1 I 4.70

Contract 2 I 3.50

Contract 3 I 2.10

Increasing Variable Cost

To be dispatched in this Order based on Energy

Demand of the Discom

Merit Order Baseline

17

SMART Procurement

Gen 1 : 100 Gen 2 :80 Gen 3: 120Avl Gen in MW

Variable cost Rs 1/unit Rs 3/unit Rs 4/unit

Possible Backdown /Surrender (MW) 20 5 25

Replacement cost/ Exchange Bid Rs 0.5/unit Rs 2.5 /unit Rs 3.5/unit

Exchange Price

Rs 2.1/unit 5MW 25 MW

Rs 2.6/unit 25MW

Opt

imiz

atio

n /R

epla

cem

ent

Bid

Smart Buy

18

SMART Procurement

• Assess Generation availability and Demand Forecast for next day (15 min block) • Generation data for Long Term (LT) I Medium Term (MT) I Short Term (ST)• Calculate Surplus and Shortage to prepare “Regular Bid”

• Prepare schedule with maximum back down possible for LT & MT • For every plant identify maximum back down possible considering all constraints

• Technical I Must Run status I Contractual I Transmission ( Intra / Inter-state)• Give technical minimum schedule to these plants and identify “Replacement Bid” quantum

• Submit Bid at Exchange (1000 Hrs-1200 hrs)• Regular Bid: For Regular Shortage/Surplus depending on the demand and Generation cost • Replacement Bid: Price sensitive bids ( based on Variable cost) for every plant• Two Bid Options

• Single Bid: For every 15 min time block separately. May lead to non uniform back down schedule • Block Bid: All or none principle for clubbed time blocks. Will ensure uniform back down schedule

• Post IEX result- finalize schedule ( after 1500 Hrs)• If Replacement bid not selected: Revise the schedule from the plants whose bid is not selected• If Replacement bid selected: No change and retain the earlier schedule (max possible back down)

19

Timeline for Bidding and BackdownIEX

Bidding

D - 1

12 PM10 AM00 3 PM

DAM Biding periodResults declared

ISGS Scheduling

3 PM9 AM00One hour

before delivery

Declared Capacity Requisition for Scheduling

D

If Bid Selected

No Need for giving Requisition

If Bid Not Selected

Requisition can be given one hour before Delivery time

20

Merit Order

Power Plant Variable Cost (Rs/kWh) IEX Price (Rs/kWh)

KAWAS LF/RF 7.46/4.51

RTC: Rs 2.23/kWh(July’17)

GANDHAR LF 4.49MAUDA (MSTPS-II) 3.00MAUDA (MSTPS-IV) 2.87NTPC RSTPS 1&2 2.42KAWAS NAPM/APM 2.05/1.83GANDHAR NAPM/APM 2.04/1.77VSTPS-STG-I 1.51VSTPS-STG-II 1.42VSTPS-V 1.42VSTPS-STG-III 1.41VSTPS-STG-IV 1.41SIPAT-II 1.37SIPAT I 1.33KSTPS 1.30

Source: www.vidyutmode.in*Landed price including POC loss and POC charges as belowPOC Loss: 2.52% & POC Charges : Rs 0.27/kWh

21

CASE STUDY: Cost Optimization by Bihar

• Bihar has initiated the process of Cost Optimization• The costlier power from Barh & Dadri stations is replaced by

the cheaper power from IEX.• The Energy Charges of these power plants are greater than the

IEX rates.

• Bihar has made a saving of over 11 crores in 21 days

Due to low prices at the Exchange there was further potential toincrease savings

22

Bihar Savings

Delivery Day Savings(in Rs. Lacs)

Further Savings(in Rs. Lacs) Total

6th June'15 19 83 102 7th June'15 55 38 93 8th June'15 51 17 68 9th June'15 31 43 74 10th June'15 37 27 64 11th June'15 60 9 69 12th June'15 46 15 61 13th June'15 75 30 105 14th June'15 12 80 92 15th June'15 18 70 88 16th June'15 31 53 83 17th June'15 181 0 181 18th June'15 71 20 92 19th June'15 102 0 102 20th June'15 103 8 111 21st June'15 78 30 108 22nd June'15 29 67 96 TOTAL 997 487 1,274

*A min of 200 MW power purchase is

considered in each block

with replacement

of Dadri & Barh power

23

0

5

10

15

Savings in Rs Crore, FY17

Mar-17

7

Apr-17

15

3.57 3.23

5.71 5.98

33.9 52.9

Wtd. Avg IEX

Price (Rs/unit)Wtd. avg

Bilateral Price

(Rs/unit)Volumes (MU)

Telangana example:Procurement on exchange in March-April ’17 increased by 45% yoy

Better utilization of exchange has generated significant savings for TL DISCOM

Note: Savings estimated by assuming that scheduled vol. from exchange would otherwise be procured from bilateral contracts. Exchange prices includes POC Charge of Rs. 0.2134/Unit, POC Loss of 1.62% of clearing price, and Rs 0.02/unit transaction charge; Wtd. Avg Bilateral Price calculated on bids placed on DEEP Platform; April prices based on bids in 1-15 April periodSource: Power exchange, DEEP Platform

Total ~Rs. 22 Cr

TL PURCHASED HIGHER VOLUMES IN FY17 WITH BETTER SCHEDULING %

TOTAL SAVINGS OF ~ RS 22 CR TO TL DISCOMS FROM PURCHASES ON PX IN MARCH-APRIL 2017

Date Total Bid(MU)

Total Sched.(MU) Sched. %

Apr-17 54.0 52.9 98%

Apr-16 54.6 46.5 85%

Mar-17 43.8 33.9 77%

Mar-16 23.5 13.5 57%

Total (Mar-Apr 17) 97.8 86.8 89%

Total (Mar-Apr 16) 78.0 59.9 77%

24

Some states have not utilized Short Term power sources (e.g. exchange) as well as other States

Note: % bought on IEX is calculated on the total energy availability; Power purchased from IEX is calculated assuming that energy is scheduled from IEX on RTC basis; MH data is based on procurement by MSEDCLSource: IEX data; CEA Reports

0

2

4

6

8

10%

UTT

ARAKH

AN

D

10.0%J&

K

4.7%

WES

T BEN

GAL

4.2%

DEL

HI

2.7%ASSAM

2.7%

CH

AN

DIG

ARH

2.6%

KER

ALA

2.0%

HP

2.0%

AP

1.6%

CH

HATT

ISG

ARH

1.4%

PUN

JAB

1.2%

TELA

NG

AN

A

0.9%

UP

0.8%

RAJA

STH

AN

0.7%

MAH

ARASH

TRA

0.5%

KARN

ATA

KA

0.5%

MP

0.0%

HARYA

NA

0.0%

469638672 1,984 234 81442 1741,295 462 298805 6 0472334 733835Volume bought on

IEX (FY17) (MU)

535314 47 9 502 913 23 61106 66 496724 13931Total Energy

availability (BU)

547377 226 27 935 20148 53 3492 1 05438 8495Power Purchased

from IEX (MW)

Share of energy bought on exchange, FY17 (%)

25

Smart Procurement : Saving Potential

Rs. 3200 crore from Smart Procurement

State

DISCOM

losses(in INR

cr, FY17E)

Smart Procurem

ent savings

(in INR cr,FY17)

Average power to

be bought (MW)

Uttar P 5012 800 1350Tamil Nadu 2224 490 660

Punjab 1681 190 400Haryana 2911 270 400

Andhra P. 1032 170 350Telangana 4380 150 300

Maharashtr 2639 110 390Rajasthan 2195 80 190

Bihar 2275 60 125MP 2278 20 70

Other states** -1955 820 1450

Total 25000 3200 5700

26

Key factors considered for Smart Power Procurement• Demand Forecast - Forecast on 15 min time block basis

• Generation Data• Plant wise DC /Entitlement of various ISGS and SGS on Day ahead basis• Variable cost of all generators (ISGS,SGS, Bilateral etc)• Applicable losses and charges Import/Export (banking etc)• Generator outage period

• Optimization potential assessment• Must run plants• Back down potential in each plant considering

• Technical minimum• Contractual minimum• Network constraints• Ramp-up/Ramp down

27

2. Smart Contracting

i. Discoms should tie-up PPA only to manage their basedemand

ii. Many Discoms have tied PPAs to meet their peakdemand as well. The Discoms have to pay the capacitycharge for this quantum even in the off peak time.

iii. So for optimum utilisation, Long Term PPA should beonly for base demand and remaining energy (for peakand variations in forecast) should be bought throughother available market options.

28

Monthly Demand Curve for Delhi

Monthly Peak -Source : CEA

4,1763,849

3,618

4,799

6,308 6,261 6,342

5,7075,305 5,442

3,5103,857

0

1000

2000

3000

4000

5000

6000

7000

Jan'16 Feb'16 Mar'16 Apr'16 May'16 Jun'16 Jul'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16

Dem

and

(MW

)

Month wise Delhi Demand (MW)

Base

De

man

d

29

Monthly Demand Curve for Punjab

Monthly Peak -Source : CEA

6,283

7,997

10,99711,408 11,204

10,543

8,408

5,5486,266 5,954

6,475 6,536

0

2000

4000

6000

8000

10000

12000

April'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 Mar'17

Dem

and

(MW

)

Month wise Punjab Demand (MW)

Base

De

man

d

8500 MW

11,500 MW

5500 MW

30

6642 6561 6815 6556 6668

74637780

89129539 9671

9215

7860

0

2000

4000

6000

8000

10000

12000

Nov'16 Dec'16 Jan'17 Feb'17 Mar'17 Apr'17 May'17 Jun'17 Jul'17 Aug'17 Sep'17 Oct'17

Dem

and

(MW

)

Base

Dem

and

Monthly Demand Curve for Haryana

Monthly Peak -Source : CEA

31

Surpluses/Deficits - Balance physical supply and demand

Meeting Shortages/Surplus through Short Term MarketMaximizing efficiency – Ideal Scenario (Monthly)

0

1000

2000

3000

4000

5000

6000

7000

1 2 3 4 5 6 7 8 9 10 11 12

Base (MW) Short Term (MW) Load (MW)

PPA (Base Load Contract)

Short Term/Exchange for peak load

Month

Surpluses/Deficits - Balance physical supply and demand

Meeting Shortages/Surplus through STMMaximizing efficiency – Ideal Scenario (Hourly)

0

500

1000

1500

2000

2500

3000

3500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Base (MW) Short Term (MW) Load (MW)

PPA (Base Load Contract)

Short Term/Exchange for peak load

Smart Contracting-Ideal mix LT

Methodology 2 -Long term PPA for 80% of total energy demand

• Draw load curve for a state (indicating demand met in MW for each hour of the year), • Estimate the demand met in MW that corresponds to meeting 80% of total energy demand

over the year• Estimate total capacity required to meet baseload demand by applying an average Plant Load

Factor (PLF) to the baseload demand met (in MW).

Commercial decision-making

34

Key considerations – for long-term • Demand projections for next few years (say 3)• Extent of Renewable growth• Solar Rooftop potential• Hydro potential in the State

35

Procurement Strategy for Renewable Energy

• Purchase of bundled green power to be benchmarked with marketdetermined prices of power & REC

• Discom can purchase Power @ 2.41 (IEX Avg. Price for FY17)REC @ 1.00

3.41

• Deficit state should procure renewable power only if the power is available atPrice less than Rs 3.41/kWh.

• Flexibility in procurement as Discom can purchase power when they actuallyneed.

Flexible Purchase at most competitive price

36

Power Exchange across Globe:Enormous potential to grow for India compared to international benchmarks

INDIA TRADES ~3% OF ITS OVERALL CONSUMPTION ON EXCHANGE MARKETS COMPARED TO 15-91% GLOBALLY GLOBAL BENCHMARKS ON PENETRATION OF ST MARKETS

0

20

40

60

80

100

Exchange traded ( % total

consumption)

India

France

UK

Netherlands

Germany

Italy

Nordic

2004 05 06 07 08 09 10 11 12 13 14 15

Indian markets still at a nascent stage and high potential for growth for the Indian Power Exchanges

VOLUME IN BU (Billion Units)

37

IEX SMART POWER PROCUREMENT TOOLUNDER PILOT TESTING PHASE

38

Generation Master39

Replacement Potential Assessment40

Bid Preparation41

Suggestions for development of competitive power market

Power Purchase cost optimisation by Discoms• Follow merit order dispatch

• Discom to ensure that the principle of economic dispatch/ merit order dispatch(National Tariff Policy), is followed while preparing day-ahead power procurementplan. The merit order should include energy charge of all available power plants,power exchange prices and prices of other short term arrangements

Policy push for promoting short term market• Prices discovered on Short term market, particularly Exchanges is very competitive,

therefore policy initiatives for short-term transactions be encouraged.• Allow coal linkages for merchant power plants also.

Long term PPAs by Discoms should be limited to 10-12 years• Discoms in past contracted long term power on the basis of peak demand, as a result,

many of the states landed up having surplus capacity during 6-7 months in a year, payingcapacity charge without utilizing the power.

• PPAs should not be more than 10-12 years to give comfort to the bankers.• PPAs which expire after 25 year period should not be renewed and be allowed to sell

power in market on competitive basis

42

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43