ROLE OF POWER TRADERS IN INDIA AND OPPORTUNITIES FOR CROSS BORDER POWER MARKET Presented by: Harish Saran, Executive Director (Marketing) PTC India Limited
WHAT IS POWER TRADING According to Electricity Act, 2003; “Purchase of electricity for resale thereof and the expression “Trade” shall be construed accordingly .
WHY POWER TRADING ? Prior to power trading as a business concept: power exchanges between the States/vertically integrated utilities were characterized by small , intermittent volumes Mostly in the nature of emergency support No commercial arrangements Non-payment or payment delays with resultant disputes The exchanges were further limited due to lack of transmission inter-connections Sustained shortages, both in energy and peak demand, discouraged initiatives
Milestones Description Central Electricity Regulatory Commission – New trading regulations; Tightening the terms for licensing keeping in view of prices of traded power, liquidity requirements and elimination of non-serious players Key changes • Electricity being purchased for resale thereof • Three categories - reduced from 6 2009 • Networth requirement range revised - from Rs. 50 million to Rs. 500 million • Net Worth definition revised to discount loans and advances given to associates • Liquidity ratios introduced • Manpower specification defined • Restrictions on procurement of power for trading – to exclude defaulters from the business chain Soft regulations for market building, control & consolidations; customized approach !
POWER TRADING IN INDIA: MODIFIED REGULATIONS Milestones Description Central Electricity Regulatory Commission – Power Market Regulations: 2010 Brought in primarily for defining & regulating the licensing & functioning of Power Exchange(s) in India CERC – Modified regulations were imposed for better control & monitoring of the market players/ trading licensees Key changes Electricity being purchased for resale in India or for export out of India Four categories – I (unlimited), II (<1500 mn units), III (<500 mn units) 2012 and IV (<100 mn units) Networth requirement range revised - from Rs. 10 million (IV) to Rs. 500 million (I) Compliance and reporting defined Non-compliance inviting strong penalties Strict regulations for managing gaming, compliance & defaults & positive impact of competition !
KEY MILESTONES: POWER TRADING LICENSING Remarks Year Key Events Pre-1999 Occasional exchange of power between the integrated utilities Incorporation of Power Trading Now named as PTC India Limited. 1999 Date of incorporation: 16-04-1999 Corporation of India Limited Grant of first trading license To PTC India Limited on 22-07-2003 2003
CAPITAL ADEQUACY AND LIQUIDITY REQUIREMENTS Category of the Volume of electricity proposed Minimum Net to be traded in a year including Trading License Worth (USD in intra ‐ State trading, where Million) applicable Category I No Limit 7.5 Category II Not more than 1500 MUs 2.27 Category III Not more than 500 MUs 0.75 Category IV Not more than 100 MUs 0.15
EVOLUTION, CONCEPTS AND STANDARD PRACTICES OF POWER TRADING IN INDIA
PRIOR TO EVOLUTION OF POWER MARKET Monopoly Suppliers (SEBs, Private Licensees) ; Each SEB had an allocated share in a Central/ Jointly owned station Generators (CGSs, IPPs and SEBs) with capacity fully tied up Price setting by Central/ State Governments – SEBs hardly having any say Entire sector developed on fixed rate return; Interplay of market forces remained non- existent Utilities would back-down in case of low demand and resort to load shedding in case of excess demand Power as a resource for earning revenue did not exist in this cost based regime
EVOLVING POWER MARKET STRUCTURE IPPs All Other Generators Captives Power Traders Exchange Transmission (CTU/STUs) Distribution (Discoms) Consumers
CATEGORY OF BUYERS • Generation from State Generation companies/Own Generation • Long term sourcing from Central Generators-NTPC/NHPC etc. State • Pooling from Ultra Mega Power projects under Case-2 Utilities/Distributi • Procurement through competitive bidding on licensees • Long term (upto 25 years.) • MediumTerm (1-5Years) • Short term (<1Year) • Power Swap arrangement between State Utilities (Banking) • Procurement from Hydel sources on bilateral basis (For up to 35 years) • Power Exchanges (IEX/PXIL) • Short term contingency through negotiation • Self Generation (Captive Power Plant) • Procurement from State Utilities/Distribution Licensees Industries • Procurement of Power from Power traders/Generators through competitive bidding/Negotiation through Open Access • Procurement from Power Exchanges (IEX/PXIL)
MARKET SEGMENT Long Term Markets ( up to 25 years)/ Short Term Markets Real time balancing Medium Term Markets (up to 1 year ) (>1 upto 5 years) Regulated Licensed Assets – UI mechanism Traders / Interstate and + penalty at State level Bilateral Competitive Bidding – Power DBFOT/ Exchange DBFOO/ FOO
WHY SHORT TERM CONTRACTS? Short term Power transactions is meant for balancing short term needs i.e. to procure seasonal and • fluctuating power requirements due to seasonal variation or any other reason(s) and to allow sellers to sell any unplanned and fluctuating surplus power. Short term purchase/sale is done for the unsold power/ mitigating the demand as last option • Features: Handle seasonal and temporary demands Market for merchant capacity Cater to unfulfilled demand by Discoms Day ahead requirements being fulfilled by power exchanges Pricing on the basis of utility of end-use, bargaining power of counterparties, competitive bidding, enforceability of reliability guarantees Challenges: Constraints in terms of availability of open access (Transmission capacity restrictions, NOC issues from Discoms)
SHORT TERM BILATERAL VIS-À-VIS POWER EXCHANGE Parameters Bilateral Trades Power Exchange Contract Tenure & Scheduling Intra-day and from 1 day up to 1 Intra-day, 1 day-ahead & up to 7 year on Firm Bilateral Scheduling days under Collective Scheduling Contracted Tariff Fixed with no variation linked to Depending up on market & Market Risk market / fuel conditions; Volatile & Risky Requirement / Usefulness Management of Surplus/Deficit on Balancing Mechanism for Day- Firm Basis Ahead Surplus/Deficit Billing & Payment Weekly billing; Payment within 7 Advance Payment with days up to 30 Days Daily Billing Credit Available 14 days up to 37 days No Credit; Advance Payment Rescheduling & Surrender Allowed on 2 days notice Not Allowed
SHORT TERM POWER PROCUREMENT : MECHANISM Bilateral By Utilities mainly for meeting contingency demands Contingency Utilities finalize the tariff based on prevailing market condition within a blanket & Day-Ahead tariff approval given by SERCs OTC under the provisions of EA 2003 MoP has recently revised the Guidelines for Short term power procurement Contracts for more than 1 day to 1 year (SBD) by Distribution licensees. All future power procurement on short term by Distribution Licensee shall be executed through e-bidding process followed by ReverseAuction. Utilities enter into power swap agreement to utilize the seasonal variation in Power Banking arrangement their load pattern Forward banking Utility returns the banked energy to other utility with some agreed premium at a pre decided date Undertaken directly or through PowerTraders primarily on negotiation basis Need of a transparent guideline for Swap arrangement is felt
BANKING ARRANGEMENT • Banking arrangement is wherein two utilities/states trade power in order to match seasonal variation in surplus & deficit situation • It is a cashless transaction wherein there is no tariff paid for the energy availed/supplied • A brief of flow of a banking transaction is shown below:- Part - A ‘State A’ will bank/supply power to ‘State B’ through PTC Trader PTC Trader Start State A State B Here PTC Trader ‘State B’ will return/supply power to ‘State A’ through PTC Trader Part - B • The banking arrangement has successfully been carried out between almost every utilities/states.
Total Volume of Short term transactions of Electricity w.r.t Total Electricity Generation Total Volume of Short term Total Volume of Short term Total Electricity Year transactions of Electricity transactions of Electricity as % of Generation (BU) (BU) Total Electricity Generation 2009-10 65.90 764.03 9% 2010-11 81.56 809.45 10% 2011-12 94.51 874.12 11% 2012-13 98.94 907.49 11% 2013-14 104.64 962.90 11% 2014-15 98.99 1045.09 9%
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