Leveraging trading through energy exchange Rajesh K Mediratta - PowerPoint PPT Presentation

Leveraging trading through energy exchange Rajesh K Mediratta Director (Business Development) Rajesh.mediratta@iexindia.com 1 For Public Use

2 Discom’s Options For Power Procurement • 25-year PPA - Tariff on cost-plus or competitive bid Long-term • 3 Month- 3 Years Medium Term • Tariff covers : Fixed Cost + Variable Cost+ Mark Up (< long term) • Intraday- 3 Months to be procured through competitive bidding only Short Term (OTC) • Single tariff covering Tariff covers Fixed Cost+ Day-Ahead • Highly liquid and transparent marketplace Market • More accurate load management • Last-minute adjustments (Gate closure 4 hours) Intra-day • Less liquid

3 India Power Sector I Present Market Segments Long Term Short Term 1,157,938 MU OTC: Exchanges: Up to 25 years Real Time Intraday to 1 year Intraday – 11 days 55,980 MU 23,218 MU 1,038,708 MU 40,032 MU 3.5% 2.0% 89.7% 4.8% Exchanges Over the Counter (Only up to 11 days)  Day Ahead Long-term Power Bilateral Trade Deviation settlement/ Purchase Agreements Agreements (OTC) Contingency Unscheduled  Daily (PPA) Effected by Licensed Interchange  Weekly traders  Day Ahead Market Short Term Power market is at ~10%, Power Exchange volume in the segment have been growing significantly Source: CERC MMC Report All values for FY17

4 Share of Short Term Market in Total Generation Share in Total 10.9% 9.5% 10.3% 10.9% 10.4% Generation 45 41 40 36 35 35 35 35 34 35 31 29 30 Volume (BU) 24 24 25 21 20 17 16 15 15 10 5 25 21 19 21 23 0 FY12-13 FY13-14 FY14-15 FY15-16 FY 16-17 UI/DSM Direct Exchange Bilateral (trader) • 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). Source: CERC MMC Reports

5 PRICE AND VOLUME TREND IN THE POWER MARKET

6 IEX Market Segments Day-Ahead Delivery for next day • Market • Price discovery: Closed , Double-sided Auction since June,08 • Intraday: For Delivery within the same day Intraday Market & Day- Day Ahead Contingency: Another window for next day • Ahead Contingency • Gate closure : 3 hours Round the clock since Jul’15 • For delivery up to 11 days Term-Ahead Contracts since Sep’09 • Daily Contracts, Weekly Contracts Renewable Energy • Green Attributes as Certificates Certificates • Sellers : RE generators not under feed in tariffs since Feb’11 Buyers: Obligated entities; 1MWh equivalent to 1 REC • Energy Saving Certificates 1 ESCert = 1 mtoe (metric Tonne of Oil Equivalent) • since 27th Sept’17 • Trading Session on every Tuesday of the Week • Trading time 1300 hrs to 1500 hrs Auction Continuous

7 Price Comparison of a typical day Winter Summer 6.00 5.00 Price (Rs/kWh) 4.00 3.00 2.00 1.00 0.00 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 15 min time block Winter: 18/12/2016 | Summer: 15/04/2017

8 High Liquidity in Volume at IEX (Avg. Hourly Volume in MW) Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) MCP (Rs/kWh) 10,000 8.00 7.23 9,000 7.00 Avg. Hourly Volume (MW) 8,000 6.00 MCP (Rs./kWh) 7,000 5.19 5.00 6,000 5,000 4.00 3.56 3.54 3.49 3.51 4,000 2.80 2.73 3.00 2.41 3,000 2.00 2,000 1.00 1,000 1,130 1,334 1,302 1,919 2,371 1,347 2,842 2,539 1,571 4,456 3,956 2,554 4,737 5,741 3,302 4,942 4,689 3,212 4,907 6,434 3,878 5,445 8,806 4,541 698 394 704 0 0.00 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Data as on 31 st Mar’ 2017

9 Monthly Market Snapshot (DAM)-Average hourly MW Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) Price (Rs./kWh) 12000.00 4.50 4.09 4.08 4.00 10000.00 3.55 3.50 Average Hourely Volume (MW) 3.13 8000.00 3.00 2.92 2.77 MCP (Rs/kWh) 2.59 2.49 2.50 6000.00 2.00 4000.00 1.50 1.00 2000.00 0.50 0.00 0.00 April May June July August September October November

Million Units Daily Purchase and Sell bid trend November 100.00 150.00 200.00 250.00 300.00 350.00 50.00 0.00 1/11/2017 2/11/2017 3/11/2017 4/11/2017 5/11/2017 6/11/2017 Purchase Bid 7/11/2017 8/11/2017 9/11/2017 10/11/2017 11/11/2017 12/11/2017 Sell Bid 13/11/2017 14/11/2017 15/11/2017 16/11/2017 17/11/2017 Cleared Volume 18/11/2017 19/11/2017 20/11/2017 21/11/2017 22/11/2017 23/11/2017 24/11/2017 Price 25/11/2017 26/11/2017 27/11/2017 28/11/2017 29/11/2017 10 30/11/2017 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Price per unit

11 Daily Purchase and Sell bid trend October Purchase Bid Sell Bid Cleared Volume Price 350.00 6.00 300.00 5.00 250.00 4.00 Price per unit Million Units 200.00 3.00 150.00 2.00 100.00 1.00 50.00 0.00 0.00

12 Monthly Average Market Clearing Price (Rs/kWh) Avg. MCP FY15-16: Rs 2.73/kWh Avg. MCP FY16-17: Rs 2.42/kWh Avg. MCP FY17-18: Rs 3.20/kWh 4.50 4.09 4.08 4.00 3.68 3.55 3.50 3.13 3.03 2.91 2.92 2.59 2.82 3.00 2.74 2.67 2.62 2.61 2.77 2.54 2.56 2.56 2.52 2.49 2.50 2.68 2.56 2.50 2.46 2.43 2.30 2.32 2.31 2.32 2.32 2.00 2.16 2.17 1.50 1.00 0.50 0.00 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Data as on 30 th Sept 2017

market Even within the day, prices @ night are much lower, providing opportunities to the Discomsto utilize the 15 min price trend on 11 th December 2017 (Monday) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 00:00 - 00:15 00:45 - 01:00 01:30 - 01:45 02:15 - 02:30 03:00 - 03:15 03:45 - 04:00 04:30 - 04:45 05:15 - 05:30 06:00 - 06:15 06:45 - 07:00 Market Clearing Price 11-12-17 07:30 - 07:45 08:15 - 08:30 09:00 - 09:15 Power in night hours available 09:45 - 10:00 10:30 - 10:45 below Rs 2.5/unit 11:15 - 11:30 MCP 12:00 - 12:15 12:45 - 13:00 13:30 - 13:45 14:15 - 14:30 15:00 - 15:15 15:45 - 16:00 16:30 - 16:45 17:15 - 17:30 18:00 - 18:15 18:45 - 19:00 19:30 - 19:45 20:15 - 20:30 21:00 - 21:15 13 21:45 - 22:00 22:30 - 22:45 23:15 - 23:30

14 Commercial decision-making ‘SMART’ Options with Distribution Companies SMART SMART CONTRACTING PROCUREMENT On a day to day basis- managing demand Ensuring ideal mix of long term and of the area by utilizing cheaper short term short term power purchase sources by replacing power from high arrangements to manage fixed cost variable cost plants and ensuring MERIT and manage availability of supply order based dispatch

15 1. SMART Procurement • Under long term & medium term PPA : two part tariff • Capacity charges (commitment charges): paid irrespective of whether discom purchase power from these plants or not • Energy charges : Paid corresponding to the number of units of power purchased from 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 substitute where energy charge is higher than IEX price

Merit order dispatch schedule to be prepared based on 16 Variable cost and considering Exchange Prices Capacity Tied up by Discom Long Term Bilateral Exchange Contracts Contracts PPA I Variable Cost IEX Price I 2.45 PPA 1 I 3.70 Contract 1 I 4.70 PPA 2 I 4.06 PPA 3 I 3.00 Contract 2 I 3.50 PPA 4 I 1.99 Must Run Plants (includes all hydro, nuclear or PPA 5 I 2.00 Contract 3 I 2.10 other ‘take or pay’ type contractual plants) Merit Order Baseline

17 Contract 1 I 4.70 PPA 2 I 4.06 To be dispatched in this Order based on Energy PPA 1 I 3.70 Increasing Variable Cost Contract 2 I 3.50 Demand of the Discom PPA 3 I 3.00 IEX Price I 2.45 Contract 3 I 2.10 PPA 5 I 2.00 PPA 4 I 1.99 Must Run Plants (includes all hydro, nuclear or other ‘take or pay’ type contractual plants) Merit Order Baseline

18 SMART Procurement Smart Buy Avl Gen in MW Gen 3: 120 Gen 2 :80 Gen 1 : 100 Optimization /Replacement Bid Possible Backdown 5 25 20 /Surrender (MW) Variable cost Rs 1/unit Rs 3/unit Rs 4/unit Replacement cost/ Rs 0.5/unit Rs 2.5 /unit Rs 3.5/unit Exchange Bid Exchange Price  25 MW  5MW  Rs 2.1/unit   25MW  Rs 2.6/unit