Transcript SUMMARY of NVVN’S VIEWS AND SUGGESTIONS on CERC …

SUMMARY
of
NVVN’S VIEWS & SUGGESTIONS
on
CERC STAFF PAPER ON DEVELOPING A
COMMON PLATFORM FOR ELECTRICITY
TRADING
National PX v/s Many (Region
Level) Exchanges
View Point As Per Staff
Paper
Single National level PX
recommended as
against region level PXs
NVVN Views
OK
Assignment of Transmission Capacity to DayAhead Trading Through PX
View Point As Per Staff
Paper
NVVN Views
• PX shall handle trading and
transmission clearance in a
composite manner
• OK. It will be highly convenient to
participants and RLDCs
• A pre-identified transmission
capacity shall be assigned to PX for
each inter-regional corridor. Any unused transmission capacity from that
reserved for bilateral trades shall
also be added on daily basis
•To begin with, at least 50% of short-term
transmission capacity should be
assigned for day-ahead trading on
Power Exchange to develop a liquid
market.
•However, the next logical step will be to
have all trading on PX and replace
physical bilateral contracts with “CfD”
which will eventually prepare the
participants for more sophisticated
derivatives like futures and options..
Bids Based On Marginal Costs
View Point As Per Staff
Paper
NVVN Views
• Market forces shall
incentivise bids based on
Bids shall be based on marginal costs in order to
win higher volume.
marginal costs
• Bidders should have
freedom to optimize their
portfolio.
Price Mitigation
View Point As Per
Staff Paper
Bid caps based on
marginal costs can
be considered.
However, such caps
to apply to bilateral
trade as well.
NVVN Views
• Double sided bids and uniform
clearing price shall incentivise
Sellers to bid based on marginal
costs to win higher volumes.
• The clearing price and volume
also depend upon the price the
buyers are willing to pay for that
volume
• Thus bid caps are not desirable.
Congestion Management
View Point As Per Staff
Paper
Market Splitting
method recommended,
but congestion
revenue to be
socialized among
participants in deficit
areas
NVVN Views
Classical market
splitting method only
recommended –
Congestion revenue may
be used for transmission
system development.
Treatment of Transmission Charges
View Point As Per
Staff Paper
• PX is a
transmission user
• Charges to be
levied on per unit
basis
• PX shall socialize
all charges among
participants
NVVN Views
• PX is not a transmission user, its
participants are.
• Concept of applying transmission
charges on an average basis is
agreeable and suitable for PX trades.
• Charges should be applied based on
contracted schedule (or implemented
schedule in case of curtailment during
real time)
• Other charges (scheduling charges
etc) may also be applied on per unit
basis and not per contract basis
Treatment of transmission losses
View Point As Per Staff
Paper
NVVN Views
Average losses for each
• To simplify the process, all bids
inter/intra regional segment be referred to inter-regional
of the transmission system boundaries so that PX contracts
are balanced.
• Actual injection and drawl
schedules shall be derived after
adjusting respective region and
state system losses.
Organization of PX
View Point As Per
Staff Paper
NVVN Views
• PX is like a “trader’
• PX is not like a ‘trader’ but facilitates
trading by others
• Multi-owner organization,
limit of 25% on individual
shareholding
• Multi-owner OK.
• Leading Power Sector players should play
a major role as key promoters
• Independent Board with
five full-time Directors,
including Chairperson and
one nominee of
NLDC/RLDCs. Advisory
council to recommend
names for approval by
CERC.
• Board of Directors to consist of
representatives of shareholders as well as
CERC/ Government nominee in suitable
proportion
• Only one/two Directors may need to be full
time.
Organization of PX (Contd.)
View Point As Per
Staff Paper
NVVN Views
• Membership for grid
connected entities and
traders having
long/medium term PPAs
• To be defined more finely. In
general, all entities eligible for
inter-state Open access to be
permitted
• ‘Profit’ is not the motive.
Expenses to be met from
membership fee and
transaction fee.
• Promoters have to invest
money and revenue depends
on volumes. There is no
guarantee for meeting
expenses. So ‘for profit’
company in principle, for
efficient operation.
Market Regulation
View Point As Per
Staff Paper
NVVN Views
• General Concepts
• Emphasis on
Regulatory intervention
• Detailed rules to be
framed by PX
• General concepts are OK. However,
de-centralized markets are not tightly
regulated. Self regulation to be
encouraged.
• Higher level regulations to be
framed by CERC suggested.
• Detailed rule book to be framed by
PX
• Market monitoring procedures to be
defined by PX after further study
Timing for launching PX
View Point As
Per Staff Paper
NVVN Views
If PX is launched • General concepts are OK. However, de-centralized markets are
not tightly regulated. Self regulation to be encouraged. Higher
immediately, it
level regulations to be framed by CERC suggested. Detailed rule
may be hampered book to be framed by PX Market monitoring procedures to be
by lack of liquidity. defined by PX after further study Market development is a
challenging task requiring simultaneous effort on multiple fronts
On the other
with a sense of urgency. There is an urgent need to set up an
hand, it may be
organized platform for electricity trading.
prudent to launch
• Current trading market size is 12 BU. This is comparable with
it in near future to initial market size in some European PX. Further, massive and
send the right
unprecedented capacity addition program both in generation and
signal to investors transmission will result in a spurt in trading of electricity in very
near future. Thus liquidity does not seem to be a constraint.
and consumers
Availability of an organized market place will in fact catalyze
about transparent more trading.
market
• Development of a Power Exchange involves significant
development
development effort which will take some time.
• We feel that there is an urgent need to facilitate establishment of
a common trading platform for electricity.
Developing a Common Platform for
Electricity Trading in India
View Point As Per Staff
Paper
Power Exchange (PX)
is a proven mechanism
for efficient and
transparent trading
NVVN Views
OK
Mandatory v/s Voluntary Participation
in PX
View Point As Per Staff
Paper
Voluntary participation
to begin with, may be
made mandatory after
gaining experience
NVVN Views
• Voluntary in principle
• All day-ahead trading shall
be through PX only
• Allocation of open access to
day-ahead trading is an issue
Double-sided Bidding v/s Only
Supply Side Bidding
View Point As Per Staff
Paper
NVVN Views
Double sided bidding is a
better option
OK
Uniform Pricing v/s Discriminatory
Clearing Pricing
View Point As Per Staff
Paper
Uniform market clearing
price
NVVN Views
OK
Day-Ahead v/s Same Day Exchange
View Point As Per Staff
Paper
PX at present may
operate on Day-Ahead
basis only
NVVN Views
OK
Time blocks for bidding
View Point As Per Staff
Paper
NVVN Views
Hourly Intervals
OK
Operational Inflexibilities of
Generators
View Point As Per Staff
Paper
NVVN Views
Block bids to be
permitted in addition to
single-interval bids
OK
Time line for PX
View Point As Per Staff
Paper
• To fit into day-ahead
scheduling process.
• Final PX schedules to be
decided by RLDCs. PX to
re-calculate in case of any
constraints
NVVN Views
• OK.
• However, RLDCs to provide
binding information on available
transmission capacity. PX
schedules shall be binding and
NO RE-CALCULATION OF
SCHEDULES BY PX.
•In case of a constraint in REAL
TIME, RLDC may curtail the PX
schedules.
Other benefits of PX
View Point As Per Staff
Paper
• Harnessing captive and
merchant generation
• PX as security against PPA
defaults
• Cross border trading
• Facilitator of consumer
choice
NVVN Views
OK
Settlement & Clearance
Mechanism
View Point As Per Staff
Paper
• Credible and viable
arrangement required
• A separate clearing house
NVVN Views
• It is an important function
of PX
•A separate clearing house
is not necessary. If required,
it can be outsourced by PX.
DEVELOPMENT
OF
POWER EXCHANGE
AT
NATIONAL LEVEL
NTPC Ltd
NVVN Ltd
An initiative for
Selection of PX Model for India
• Analysis of Indian Electricity Trading Market
• Study of International Electricity markets
• Consultations with MoP, CEA, PGCIL and PTC
• Development of DPR for PX in India
Consultants:
Consortium of M/s NordPool Consulting AS, Norway
and M/s CRISIL, India
Preparatory Work Done
• A professionally prepared DPR
• Consultations with other stakeholders
during preparation of DPR
– Core Team
– Workshop for stakeholders
• Full implementation plan available
–
–
–
–
Hardware & software issues
Procurement, Training & Implementation
Model Agreements
Business Case
Our Proposal
•
Power Exchange may be promoted as a separate
company by key players in power sectors and
gradually provided with more diversified ownership
and governance structure. CERC Staff Paper on PX
also recommends a diversified ownership. It is
common to find examples of PX promoted by the
stakeholders in European Markets.
•
Development of Power Exchange for physical delivery
market is complex due to nature of electricity.
Therefore, the design of the product, trade system and
operational procedures require a thorough
understanding of generation, transmission,
consumption and trading of electricity as well as
system operation.
Our Proposal
•
The focus of PX is market development. In India, the
trading market is small and limited to tradable shortterm surplus. Therefore support and participation by
market players is crucial for market development.
•
CPSUs under the MoP are respective market leaders,
possess significant domain knowledge, technical &
managerial expertise and financial strength. They also
have an experienced pool of necessary manpower to
support the creation and operation of PX. Further, the
Government Companies playing a leading role in the
development of PX shall provide significant comfort to
the market participants with regard to neutrality and
transparency.
Our Proposal
•
•
•
•
•
Accordingly, the following may be considered for
establishing the Power Exchange:
Power Exchange shall be promoted as a separate
company under the Companies Act with CPSUs under
MoP as the initial promoters, who shall contribute Initial
50% of the authorized capital in equal proportion.
(Authorized capital shall be of the order of Rs. 50
crores.)
Balance 50% of the authorized capital shall be issued
subsequently to State power utilities, FIs, Banks,
Traders etc.
Shareholding by an individual entity may be limited to
25% of the paid-up capital.
The Company shall have Shareholders’
representatives and also the nominee of CERC/
Government in suitable proportion on its Board of
Directors.
Thank you