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Using Power Exchanges for enhancing
cross border trade
Rajesh K Mediratta
Sr. VP(BD)
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On-line
National
Automated
StandardizedStandardizedContracts
CounterpartyCentral
Counterparty
Delivery…
•Spot•Intra-Day•Day-ahead
•Forward•Weeks•Months
Voluntary
What’s Power Exchange?Organised Marketplace
Handles…
� Bidding � Delivery� Money� Risks
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network / grid system operator(s)
regulatorsInfrastructure
energy exchange(s) Market Place
generatorsdistribution companies
consumerstraders
Market Participants
Electricity Market Stakeholders
Policy Framework
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network / grid ?system operator(s)
regulatorsInfrastructure
energy exchange(s) Market Place
generatorsdistribution companies
consumerstraders
Market Participants
Cross-border Electricity Market Stakeholders
Policy Framework
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Value of Lost LoadAdditional costs much lower than economic gains
CURRENCY (INR/USD)
A GDP Addition INR USD
1 Lost Load (100MW@20h/day) 876,000 876,000MWh/y
2 Avg. Price of Electricity 3000 60CUR/MWh
3 Cost of Power 2,628 53 million CUR
4
Net GDP Contribution (5 times
consumption)* 13,140 263million CUR
B State Revenues
1 Indirect Tax @ 5% 657 13million CUR
2 Direct Taxes (viz.Income Tax)@10% 1314 26million CUR
3 Net Income for the State 1971 39million CUR
C Cost of Hardware 1000 20million CUR
Assumed Investments : 100km long 400kV D/C line with substations both sides.
400kV D/C lines can carry 1000MW worth ten times the calculated values.
*Electricity constitutes 20% in energy intensive industries. Such industries are 40% total
consumption in country. The industries catalyses the ancillaries around, adds to direct and
indirect tax revenues and causes secondary and tertiary service industries around.
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IEX Market SegmentsDelivery-based Electricity Contracts
Day-Ahead
Marketsince June,08
Closed , Double-sided Auction
10-12 am bidding
Each Hour , 0.5 MW min
Term-Ahead
Market
since Sep,09
Day-Ahead Contingency – Another window 3-5pm
Intra-Day - for rolling evening peak hours
Daily- for rolling seven days (starting after 5 days)
Weekly- for Next 2 weeks
Renewable
Energy
Certificates
since Feb,11
Green Attributes as Certificates
Sellers : RE generators not under feed in tariffs
Buyers: Obligated entities
1MWh equivalent to 1 REC
Way forward… Energy Saving Certificates
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• Double-sided Closed auction • Hourly day-ahead contracts (MWh)• Physical delivery• Central counter party: IEX• Equilibrium price for each hour
(Rs./MWh)• Hourly volumes/prices published
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 240.005.0010.0015.0020.0025.0030.0035.0040.00MWh Eur
Day-Ahead Market(DAM)Delivery-based Electricity Contract
Price
Quantity
SupplyDemand
clearing price
traded volume
Price
Quantity
SupplyDemand
clearing price
traded volume5
4
3
2
1
For scheduling, coordination with NLDC -> SLDCs. Settlement @Regional Periphery
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Power ExchangeBenefits
• Competitive Markets
• Transparent and neutral platform
• Price discovery – trusted and reliable
• Double-sided bidding – best price discovery tool
• Not prone to market manipulation
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Cross Border Power ExchangeBenefits
• In utilization of Natural Resources for Regional Development
– Nepal & Bhutan have High Hydropower Potential
– India has Huge Coal Reserves
– Bangladesh has Gas Reserves
• Instant Help to Contingent Systems
• Savings on Operating Costs
• Utilisation of Cheaper Generation
• Optimal use of Resources
• Enhance Efficiency and Reliability of Power Supply
• Lower Reserve Margin
• Benefit from Economies of Scale in Power Generation
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Cross Border Power ExchangeBenefits
• Use DIVERSITY
o Demand Diversity
o Time Diversity
o Events – Religious, Political, Sports, national festivities
o Weather Changes
o Load profile and consumer mix
o Capacity Mix
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Nepal Load Curve 18th Jan’11
Source: NEA Annual Report
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Surpluses in India Sale bids higher than purchase bids (6 months FY12)
Month Sale Bid(MWH)
Purchase Bid(MWH)
Surplus(MWH)
Price(Rs/kWh)
August 2010 1,941,772 1547,628 394,144 3.37
November 2010 2,286,718 961,796 1,324,922 1.99
March 2011 2,105,200 1,997,377 107,823 3.41
June 2011 2,002,995 1,467,755 535,240 2.80
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Surpluses in India Sale bids higher than purchase bids (6 months FY12)
26
22
20
34
20
39
21
60
21
51
27
76
27
73
28
49
27
82
25
69
25
81 29
26
17
10
15
58
15
94
14
98
15
81
18
16
0
500
1000
1500
2000
2500
3000
3500
Apr'11 May'11 Jun'11 Jul'11 Aug'11 Sept'11
Volume (MW)
Month
Total Buy Bid (MW) Total Sale Bid (MW) Total Cleared Volume (MW)
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• Surplus transmission capacity
• Deviation Settlement Mechanism
– Single-Buyer Model will not need
• Payment Security
– Nodal agency model (eg PTC) will take care
• Method for determination for surplus transmission capacity
determination
– Nodal agencies for ATC calculations specified
For examples, India-NLDC and Nepal – NEA.
– Both countries will determine ATC considering downstream networks
– ATC in both directions calculated
– Min of ATCs specified by both NAs in each direction declared as ATC
Cross-Border Exchange Necessary Conditions
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Cross-border ExchangePossible models … phased development
• Stage 1/Option 1: PTC as Nodal Agency
– Indian Power Trader PTC India Ltd made nodal agency for all the transactions
of Nepal.
– IEX deals with PTC and PTC will further deal with Cross-border participants
• Stage 2/Option 2: A Cross-border trader as Nodal agency
– Cross-border Member having government’s mandate and guarantee
– IEX deals with the Member and he further deals with local participants
• Stage 3/Option 3: Nepal Power Exchange as Nodal Agency
– Cross-border Power Exchange becomes nodal agency
– The Exchange collects bids of all participants and then forward to IEX
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Stage 1/Option 1: PTC as Nodal Agency
• There will not be any need to make any changes in the
present regulation and orders
• As a power trader PTC can handle finance of the clients
• PTC will bid and clear on behalf of Nepal clients
• The payment security mechanism will be taken care by PTC.
• PTC will be handling Clearing & Settlement arrangement:
– They may collect payment/funds for a longer period , before trade or
after trade
– They will do all the Co-ordination for C & S across the border
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Stage 2/Option 2: Cross-border trader as nodal agency
• As per current regulation, only Indian company can become
member of IEX.
• Will need to make changes in the Regulation of both the countries
• International fund transfer/payment to work out.
– International money transfer is time consuming
– 100% Payment/ fund for trade from the parties will be collected in
advance
• Risk hedging of other participants may become an issue due to the
international participants through out of the country member
• Local member can give advisory to local participants
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Stage 3/Option 3: Cross-border power exchange as nodal agency
• Comprehensive Regulation s need to be put in place
• Market price and volume determination issues:
Option 1: Common price for all the participants
⁻ Local power exchange only collects the bids and pass on to IEX for
common price and volume determination
⁻ This will give a common price signal to all the participants
Option 2 : Surplus bids passed to Host Exchange
⁻ Two different prices- Local Exchange Price and IEX price
⁻ Local exchange 1st runs the solution and sends the un-cleared
volume to IEX
⁻ Advantages of bigger markets not available to local participants
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Process @IEX DAM Interventions envisaged for cross-border exchanges
Registration
with IEX
TSO
Clearance
Margin
Money
Collected
Before Trading Day Trading Day
10-12
Bid Entry
12-13
Matching
•Option 1: Through PTC
•Option 2: Through Local Member
•Option 3: Through Local Exchange
Calculate
-MCP
-MCV
Prov. Solution –sent to TSOs
13-14
Trans
Check
TSO Trans Checks
- Inform congestion period and capacity available
18
Schedule
by TSO
TSO incorporate Collective Transactions in the Daily schedule
•Option 1:
Through PTC-
•Option 2:
Through Local
Member-
•Option 3:
Through Local
PX
•Nodal
Agency of
the
Country
need to
give the
clearance
•Process
to be
defined
15:30
Pay-In Taken
From Buyers
De
liv
ery
Da
yD
eli
ve
ry D
ay
Post Delivery
Day
Pay-Out To
Sellers
Deviation
Settlement
Congestion Fund
•Option 1: Given to SPV
•Option 2: Given to Local TSOs
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Cross Border ExchangeKey Requirements
• Deviation Settlement
• Payment Security mechanism
• Dispute resolving resolution
• Clearing & Settlement arrangement:
– International banking is time consuming
– Co-ordination for C & S across the border extremely important
– Payment/Fund transfer mechanism need to be put in place
• Proper risk hedging mechanism
– 100% advance payment from buy side can be taken
– Sellers may be paid after delivery
• Congestion management:
– The utilization of the congestion fund
– Transmission corridor maintenance and development
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• Manage transmission congestion
– Common market price for all the participants
except in case of congestion.
– Market splitting and area prices are determined
for different bid areas .
– Area prices different across congested corridors
– Transmission capacity allocated through
implicit Auction – no separate auctions for
transmission
– Best method to handle energy + transmission
together in one trade session
– Favoured by European Commission for Internal
Electricity Market in coupling all Central
European, Nordic and Et European markets
Handle Transmission Congestion Market splitting manages energy and transmission together
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Bid Areas
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Transmission Congestion Fund Utilize for Transmission Corridor Development
• Congestion fund = (Buy & Sell Volume difference) * (Difference
in price of interconnected bid areas)
• Utilization of the Congestion fund generated due to deficit
market in Nepal area
– Option 1: Can be directly given to the SPV operating the across border
transmission corridor
– Option 2: The Nepal Govt. may be given the congestion fund and they
may further utilize that fund for development of the transmission
corridor
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IEX CapabilitiesIn handling multinational transaction
�The platform can be used for trading :
� Electricity among South Asian
Nations
� Associated transmission capacity
� Multi-currency trading
� Certificates for Renewable
� Any Product within Nepal
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Way Forward
• Integrating Markets
• Liquidity
• Diversity
• Better Price Discovery
• Share Shortages/Surpluses
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Way Forward..
• SAARC single Electricity Market
– Single Day-Ahead Market for SAARC Market
– Ministries from EA , Commerce. Energy to be made aware of such possibility
– Examples around world:
• NORDPOOL ( 4 countries)
• SAPP(9 countries)
• Central West Europe (CWE)Single Market
• Requires establishing Common minimum
– Balancing & Settlement Rules across countries
– Payment Security & Commercial terms
– Grid connectivity standards
• Political Will to be aligned for Mutual Benefits of the Power Systems of
countries
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SAARC Energy Exchange Roadmap for facilitating framework in each country
• SAARC Expert group under aegis of SARIE
• Draw outline and take up in line with each phase of
development
– Create Nodal Agency
– ATC Calculation Procedure
– Deviation Settlement Mechanism
– Opening market for participants
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28
OMEL
APX UK
EEX / Powernext
GME
OMIP
European Internal Electricity Market EC directives
Nord Pool
OPCOM – SE POOL
Emerging system price zones?
Market Coupling
Consolidation?
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Common Market in Europe... 2010
Nordpool
Implicit auction in use
EEX
APX
CASC CAO
(GME)
Only explicit auction
Other methods
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Europool?
Implicit auction in use
Only explicit auction
Other methods
Common Market in Europe... 2015
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• 43 Discoms from 27 States and 4 Union Territories
• 1000+ Portfolios
• 873 Direct consumers
• 600+ participants on single day
• Cleared Volume : 29 Billion Units
• Average Daily Volume : 45,000MWh(~1700MW)
• DAM Volume Record : >60MUs
89%
11%
IEX
PXI
IEX Market Share (31 Oct ’11)
About IEX Growth in 3 years
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IEX monthly Average Price
7.66 7.68
6.14
8.36
6.41
4.08
2.78
5.76
3.43
2.34 2.36
3.392.79 2.98 2.99 3.10
5.43
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00Rs./KWh
Month
Monthly Avg Price(Rs/kWh)
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IEX Monthly Volume
0.42
279355 377
478 472541 563
748
112811211211
114711141178
13081244
0
200
400
600
800
1000
1200
1400
1600
Vol
ume
(MU
s)
Total MonthlyVolume (MUs)
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