CONSULTATIVE WORKSHOP

ON

COMPETITIVE WHOLESALE POWER MARKETDESIGN AND WAY FORWARD

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Agenda

Part-2 Market Development (GoP’s Decisions and NEPRA Act 2018)

Part-1 Historical Perspective of Market Development in Pakistan

Part-3 Market Structures Evolution in Pakistan

Part-6 CTBCM Detailed Design

Part-5 Implementation Coordination as Proposed & Approved in CTBCM Model

Part-7 Takeaways / Recommendations

Part-4 Preparation of CTBCM & Its Approval & Actions for Entities

Part-8 Comments / Feedback

Part – IHistorical Perspective of Market Development in Pakistan

3www.cppa.gov.pk

WAPDA Strategic Plan

1992 1997 1998

• Enhance capital formation• Improve efficiency and

rationalize prices, and• Move towards full

competition by providing the greatest possible role for the private sector through privatization

NEPRA Act

• Enactment of NEPRA Act• Formation of Independent

Regulator (NEPRA) to oversee the restructuring process

Unbundling of WAPDA

PEPCO

- Transition Management Company

- Oversee the corporatization & privatization

- Formed Business Plan for Restructuring process

GENCOs (4)

DIS

CO

s (1

0)

NTDC

• LESCO• GEPCO• FESCO• IESCO• MEPCO• PESCO• HESCO• QESCO• TESCO• SEPCO

- Thermal Power Generation Companies

- Transmission Network Operator - System Operator- Planner- Power Procurer - Power Market Development

- Perform Supply Business

- Perform distribution, construction, expansion, maintenance operation of the distribution system

Power Sector Reforms (Historical Perspective)

2002 2013

- NTDC was granted Transmission License to perform five functions:.1) TNO.2) SO.3) Planner.4) Metering Service Provider.5)Contract Registrar/

PEX Administrator

- Per licensing requirement, NTDC was mandated to develop the whole sale market (CTBCM) by 2008

Historical on Market Development

2009

- National Power Policy 2013-“… Innovative business and regulatory models will be deployed to weaken the monopolies, increase efficiencies, and decrease costs through competition. Wheeling charges and whole sale markets may be introduced to introduce multiple buyers and sellers in the market place.”

Legal formation of CPPA. However, functioned as Department of NTDC from 2009 to 2015.

2017

- ECC’s Decision April 2015- CPPA through consultation prepareCTBCM Model and Plan by June 2017

- The CTBCM is for wholesale market- Will be approved by NEPRA- Commercial Operations date: June 2020

- CPPA Operationalized- CPPA formed Market

Development Department

2015

- CPPA prepared and submitted the model and plan to Board in July 2017

- The Board formed a Special Committee - The Special Committee evaluated the

plan- Board principally approved CPPA’s re-

structuring and allowed submission of CTBCM submission to NEPRA

- Consultations with SECP

2018

-The model and plan submitted to NEPRA for review

- Request for ECC in amending timelines

- New NEPRA Act Amendments

- MO’s Authorization

- Comments- Partnerships

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2019

-NEPRA Approved CTBCM Model

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Government of Pakistan

MoE (Power Division)

Pakistan Atomic Energy

Commission

NEPRA (Regulator)

Private Sector

WAPDA AEDB PEPCO PPIBCHASHN

UPPKANUPP IPPs

SPPs/ CPPs

K-Electric

Mega Dams

Water Projects

GENCOs DISCOsNTDC

(TNO+SO)

CPPA-G

Overview: Market Operator in the Electricity Market

MO

License

es

Ow

ne

rship

Ownership

Market Participant

Service Providers

SO + TNO

Ministry of Water

Resources

Electricity Market: Service Providers and Participants

Generators as Market Participants Transmission Service Provider NTDC

- DISCOs: Wire Business & Electric Power Supplier - Participants as Electric Power Suppliers 10 DISCOs and KE

- Service Provider for wire business/distribution

- BPC > 1MW- Others non-eligible

customer

Wholesale Electricity Market Operator

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Legal NEPRA Act 2018 Electricity Act 1910 Constitution Parliament

PolicyNational Electricity

Policy & PlanPower Policy 2013 1994, 2002, 2015 CCI/MoE

RegulatoryMarket Rules, Power Procurement Rules

Grid, Commercial and Distribution Codes

Wheeling, Competitive Bidding, Import Regulations etc NEPRA

Generation IPPs Public Sector K-ElectricRegulated to Competition

TransmissionTransmission Network

Operator (TNO)System

Operator (SO)Planner

NTDC Regulated Service Provider

Metering Service Provider

System

OperatorSupply = Demand Operational Planning

NPCC RegulatedService Provider

MarketOperator

Agency Role Billing & SettlementMarket & Product

Development

CPPA RegulatedService Provider

DistributionDistribution Wire

Business (Regulated)Sales or Supply Business

(Competition)Metering Service

Provider (Regulated)DISCOs/KE

Markets Single Buyer Competitive Wholesale Competitive RetailIncrease

Competition

Paki

stan

’s E

lect

rici

ty M

arke

t Fr

amew

ork

Electricity Market Framework

Reliable Grid

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Market Development Updates

• The journey started in 2015

• MO’s capacity in Market Design and Development• Dedicated Market department

• MRC Market Design Consultants hired through ADB’s support

• MoUs with EPIAS, EPEXSPOT and LUMS as Market Development Partners

• Training Partners (PSR Brazil, CRA and others)

• Learning Exchanges (Turkey, India, NYISO, IESO, AESO, South Korea)

• Market Literature studied (NordPool, European, North American and other Latin American Markets)

• 100+ consultative sessions including workshop and one-to-one consultation meetings with stakeholders

• Around 2,000 man days of training on market development

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Phase-I(Conceptual Market Design)

June 2016– July 2017 In parallel

Phase-II(Detailed Market Design)

Phase-III(Implementation)

Wholesale Market Design – Phased Approach

Number of Reports Produced

• Following reports have been produced:• Report 1 CTBCM Model Design – Concept Paper • Report 2 CTBCM Model – Roadmap• Report 3 CTBCM – Model Consolidated Report• Report 4 CTBCM – Detailed Design Report• Report 5 CTBCM- Market Modelling /Simulations based on SDDP• Report 6 CTBCM Financial System for CPPA Report• Report 7 NPCC Gap Analysis Report*• Report 8 CPPA’s Restructuring Report & Plan• Report 09 Integrated Electricity Market Simulation Model (IEMSM) and Report • Report 10 Data Institutionalization Report*• Report 11 Single Buyer Plus Model – Concept Paper and Plan• Report 12 Marginal Price Discovery Report

• Assistance by CPPA to DISCOs and NTDC in preparation of:• Report 13 PMS Report – Country Level x 2• Report 14 PMS Report – All DISCO x 2• Report 15 NTDC Regression Report• Report 16 Power Market Survey Manual• Report 17 Integrated Generation and Capacity Expansion Plan (IGCEP)• Report 18 NPCC Annual Production Plan based on SDDP

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Market Development Core Team

Strategy & Market Development Department

Training Partners in Market Development

Strategic Partnerships

- Gen. Planning & Load

Forecast Consultants

CPPA Core Market

Dev. Team

Electricity Market Team

DISCOs Working Groups

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(BME + BMC)Balancing Mechanism

ERP Data Inst.SFS Cost Opt. Tools

MP AppCDXPMonitoring

Portal

CPPA’s IT Enablement for Competitive Market Operations

IT Enablement for Future SPS Function IT Enablement for Future MO Function

DR SiteData Center

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Electricity Market Team

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EMP Program 2018

Part – IIMarket Development (GoP’s Decisions and NEPRA Act 2018)

18www.cppa.gov.pk

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• ECC Decision April 30, 2015

• Point 9 of the Decision:

• Wholesale Competitive Trading Bilateral Contract Market (CTBCM)

• CPPA-G prepares CTBCM Plan through consultation with stakeholders

• Transition to be completed not later than July 2020 (Now Oct 2021)

• Model to be submitted for approval by NEPRA

Wholesale Market Development Mandate

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NEPRA Act 2018

• Four Chapters and 51 Clauses

• Chapter 1 General; Clause 2, Definitions:

• Bulk Power Consumer

• Electric Power Supplier

• Electric Power Trader

• Market Operator

• National Electricity Policy & National Electricity Plan

• Interconnection Service

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NEPRA Act 2018

• Chapter 1 General; Clause 2, Definitions:

• National Grid Company

• Provincial Grid Company

• System Operator

• Transmission

Important Clauses of the Act w.r.t today’s discussion:

• Section 14C, Captive Generation

• Section 14D, Duties of Generating Companies

• Section 16, Transmission License

• Section 17, National Grid Company

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NEPRA Act 2018

• Section 23

• 23 A&B for Market Operator

• 23 C&D for Trader

• 23 E&F for Supplier (DISCOs Deemed Supplier & Last Resort Supplier)

• 23 G&H for System Operator

• Section 25 Licenses of Territory Served by KE

• 25 A Registration

• Section 31 Tariff

• Section 32 Investments & Power Acquisition Programs

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Legal & Regulatory Framework w.r.t Market Development

• CTBCM in NTDCs License 2002.

• Important features of NTDC’s license PEX & CR function w.r.t Market Dev:

• Balancing services

• Dispatch Central except SPPs

• CTBCM operational by 2008

• The Grid Code w.r.t competitive market or bilateral trading:

• Balancing Code

• PSODA for generators with bilateral agreements & except 11 kV all generation on central dispatch

• Scheduling & Dispatch Code

Part – IIIMarket Structures Evolution in Pakistan

24www.cppa.gov.pk

Single Buyer Market Structure

Single Buyer: Means only one Buyer can purchase power

Buyer: Central Power Purchasing Agency Guarantee (CPPA-G) Ltd as an agent on Behalf of DISCOs

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Generators CPPA-G DISCOsInvoices

CTR & ETR

Payments

Current Structure: Single Buyer Plus Market

Single Buyer Plus: Means where BPCs can purchase directly from Generators as well as DISCOs are also allowed to purchase bilaterally fromgenerators apart from single buyer

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Generators CPPA-G DISCOsInvoices

CTR & ETR

Payments

BPCsWheeling Regulations 2016

CTBCM: Commercial Operations Oct 2021

CTBCM: Means where BPCs and DISCOs can only purchase directly fromGenerators and are allowed to purchase from single buyer only to theextent of large-scale strategic projects.

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Generators CPPA-G DISCOsInvoices

CTR & ETR

Payments

BPCsWheeling Regulations 2016

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CTBCM: Technical and Commercial Transaction in Proposed

Wholesale Market

GG

TransmissionSystem

DistributionSystem Non-Eligible Consumer

(<1 MW)

Eligible Consumer(>=1 MW)

Consumers

𝑃𝑃𝑃 = 𝐸𝑃𝑃 + 𝐶𝑃𝑃𝑃 𝑈𝑜𝑆𝐶 +𝑀𝑜𝐹 𝐷𝑀 𝑃𝑃𝑃 + 𝑈𝑜𝑆𝐶 +𝑀𝑜𝐹 + 𝐷𝑀

Power Purchaser (DISCO’s Agent)

Market Operator

CPPA-G

PPA/EPA

PPAA

Settlement

Central Dispatch (NEPRA Act Sec.14D and 23G)

Self Dispatch(Grid Code)

TT GS Eligible Consumers

Contract = Actual

ActualContract

Balancing MechanismBME + BMC

(NEPRA Act Sec.23E)(NEPRA Act Sec.23C) (NEPRA Act Sec.22)

Power Flow

$$

Part – IVPreparation of CTBCM & Its Approval & Actions for NTDC & NPCC

29www.cppa.gov.pk

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• CPPA-G prepared CTBCM Model and Plan through consultation with stakeholders and submitted to NEPRA in March 2018 for regulatory approval

• NEPRA approved CTBCM Model on December 5, 2019

• An extension of 1.5 years for COD approved by ECC in its decision dated October 30, 2019

Authority’s Approval of CTBCM Model and COD Extension by ECC

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• Market Design has been approved

• Stakeholders’ actions being part of the model has been approved (17 group of actions including policy, regulatory, institutional, commercial and others)

• Authority has directed to update the plan and submit it for approval with revised timelines through consultation

Authority’s Approval of CTBCM Model

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Timelines – Market Reforms

Jan Feb Mar Apr May

Jan 2020Stakeholder Consultations

(Plan Update +Detailed Design)

Feb 2020Submission to NEPRA by Feb 5

(Updated Plan +Detailed Design Reports)

Mar 2020Submission to NEPRA by

Respective Entities by Mar 5 (Plans Detailed Reports)

May 2020Updated CTBCM Plan

approved by NEPRA

1.5 Years

Nov 2021

April - May 2020Internal approvals of Budgets by respective entities’ Boards

18 MonthsImplementation of CTBCM Plan

by respective entities & Centralized Support +

Monitoring

Oct 2021Commercial

Operation Date of CTBCM

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• Actions within 60 Days: CPPA to coordinate and update Implementation Plan and Detailed Designafter consultation with stakeholders

• CPPA

• DISCOs

• NTDC

• NPCC

• K-Electric

• MoE (PD)/AEDB & PPIB

• NEPRA

• Deliverables due in 60 Days after consultation:

1. Implementation Roadmap Report

2. Detailed Design Report

3. IE-MSM Report

Actions from the Decision of the Authority and Approved Market Model

Directions given in the approved Model

Directions given in the Decision Part and approved Model

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• Actions within 80 Days: Relevant Entities to submit Detailed Reports on scope and immediate interventions required for CTBCM implementation

• Report Submission by NPCC

• Report Submission by NTDC

• Report Submission by each DISCO

• Ongoing Quarterly Progress and Implementation Report by respective entities

Actions from the Decision of the Authority

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CPPA

Within 60 Days of Determination:

• Updated Implementation Roadmap/Plan (in consultation with stakeholders)

• Updated Detailed Design of CTBCM Model (in consultation with stakeholders)

• Updated Integrated Electricity Market Simulation Model (IE-MSM) Report

• Roadmap will include CPPA restructuring timelines which are covered in Part-II of the presentation

On Regular Basis:

• Quarterly Progress Reports on the complete roadmap

Directions in CTBCM Approval Determination for CPPA

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NTDC (As Planner, Metering Service Provider and TNO)

• Provide assistance to CPPA in the preparation of CTBCM Implementation Roadmap

[within 60 days]

• Detailed Report on the interventions required for CTBCM implementation

[within 80 days]

• Quarterly Progress Reports

Directions in CTBCM Determination for NTDC

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NPCC (As System Operator)

• Provide assistance to CPPA in the preparation of CTBCM Implementation Roadmap

[within 60 days]

• Detailed Report on the interventions required for CTBCM implementation

[within 80 days]

• Quarterly Progress Reports

Directions in CTBCM Determination for NPCC

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• MoE (PD)

• NEPRA

• DISCOs

• AEDB/PPIB

Actions for Other Entities

Implementation Roadmap

39www.cppa.gov.pk

40

No. GROUP OF ACTIONSStakeholders directly

involvedNo. GROUP OF ACTIONS

Stakeholders directly

involved

0Implementation Process Start; Overall

Decision and Actions; Coordination

MWP

NEPRA

CPPA G

10.1 Codes: New Market Commercial Code

CPPA G draft and

consultation,

NEPRA review and

approval.

1

Policy on market development, White

Paper describing the market conceptual

design

NEPRA;

CPPA G (draft);

MWP public consultation

and with other institutions,

10.2 Codes: Update Grid Code

NTDC and Grid Code

Review Panel.

NEPRA review and

approval.

2 Amendment to legal framework MWP with CPPA G support 11Strengthening of System Operator, enforce

rights and obligations NTDC and NPCC

3

Modifications to adapt or replace energy

policies to be consistent with the market

development policy

MWP 12Strengthening Discos credit worthiness and

readiness as market participants

Discos & MWP as the owner

of Discos

and

SPS

4

Modifications to power sector regulatory

framework to be consistent with the market

development policy

NEPRA. 13

Open access to transmission services:

formalize transmission services rights and

obligations  

NTDC as Transmission

Network Owner

NPCC as System Operator.

5

Assignment of pre-existing PPAs/EPAs

signed or administered by CPPA G among

Discos

MWP and CPPA G,

IPPs and Gencos

Imports

Discos

14

NTDC as Planner (Least cost expansion

plan) and Metering Services Provider

(adequate revenue settlement meters)

NTDC,

NEPRA review and

approval of plan

CPPA G (as observer of

6Separation of CPPA G into Market Operator

and Special Wholesale Supplier FunctionsCPPA G 15

Measures to enhance wholesale payment

culture: credit cover mechanisms and

payment system

CPPA G/Market Operator

Discos

MWP

IAA

7Creation of the Market Operator as a

separate company

CPPA G in particular Market

Operator Business Unit16

Readiness for commercial operation of

electricity market:

Lead by CPPA G, includes

all market participants;

CPPA G reporting of

readiness tests and results

8Creation of the SPS as purchaser of not yet

not assigned PPA/EPA

CPPA G in particular SPS

Business Unit;

Discos

17Declaration of date to start commercial

operation of the market MWP

9

Creation of the Independent Auction

Administrator (IAA) and scheme for credit

cover / guarantees for low performing

Discos

MWP (PPIB);

CPPA G

Discos

Part – VImplementation Coordination as Proposed and Approved in CTBCM Model

41www.cppa.gov.pk

Joint Secretary Power Finance

(Convener MIMG)

CPPA-G

MISC + Secretary MIMG as Member Executive

Management

NPCC NTDCDISCO’s

MIMG Member

NEPRA

Member Executive Management

Universities K-Electric Generators

Support Staff in MoE

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Market Implementation Monitoring Group (MIMG)

Re-Operationalization

Level-1(MoE)

Level-2(CPPA & NEPRA)

Level-3(Relevant

Stakeholders)

To provide guidance and leadership

• Will be acting as PMO• Responsible for Monitoring,

Reporting & Coordination

• Channel the MIMG requests into the entity they are representing and vice versa • Produce the requested information in front of the MIMG• Coordinate the participation of experts of the represented entity in

meeting in which their participation is requested by MIMG

Part – VICTBCM Detailed Design

43www.cppa.gov.pk

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The Electricity Market

• A trading environment where multiple sellers trade with multiple buyers,

market products under specific rules.

• Service providers. What do they do?. Restrictions?

• Competition may apply in certain segments of the market. Which ones? Why?

• Why regulation still is necessary?

GateClosure

GateClosure

Bilateral Trading Centralized Trading Integrated with System Operation www.cppa.gov.pk

Pakistan’s Electricity Sector

Generators as Market Participants Transmission Service Provider NTDC

- DISCOs: Wire Business & Supplier - Participants as Retail Suppliers 10 DISCOs and KE

- Service Provider for wire business/distribution

- BPC > 1MW- Others non-eligible

customer

Wholesale Electricity Market Operator

www.cppa.gov.pk

www.cppa.gov.pk

Market Opening Benefits

• Stimulate appropriate infrastructure investments from private sector

• Competition provides customers with choices

• Achieve efficiency both in energy and economic terms

• Pressure on Price / Adequacy through competition

• Create the conditions for a fair allocation of risk and benefit sharing betweeninvestors/sellers and buyers/consumers

• Standard products traded in market enhancing liquidity

• Level the playing field; removing conflict of interest to facilitate entry of newinvestors and participation of private players, including Bulk Power Customers

• Ensure transparency and predictability

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Market Design Objectives - CTBCM

(i) providing open access to all market participants on a non-discriminatory basis;

(ii) creating an environment to attract investment;

(iii) ensuring further evolution of wholesale market to advanced phases;

(iv) promoting competitive arrangements, both for and in the market;

(v) promoting payment discipline among market participants;

(vi) eliminating sovereign guarantees over time;

(vii) ensuring compatibility of principles for operation of retail market; and

(viii) creating an environment for compatibility / participation of regional electricity

market.

Review of existing Legal and Regulatory Framework

• Before proposing any model:• A thorough review of the existing legal and regulatory framework was undertaken• Peculiarities identified and discussed in detail• Various option analyzed to address different aspects of the model

• Review of the carved-in-stone PPAs and their integration with the market.• Forced market integration• Forced contract negotiation• Voluntary renegotiation• Adaptation of market rules• Virtual Generation / Managed Contracts• Contractual Buy-Outs

• Adaptation of Market Design and Virtual Generation option seemed more feasible• Also implemented in Alberta, Mexico etc.

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Products

• Energy

• Firm Capacity

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CTBCM Concept

51

▪DISCOs will be allowed to sign new contracts bilaterally with Generators▪Existing PPAs between IPPs and NTDC/CPPA G (on behalf of DISCOs) will be converted will be commercially allocated to DISCOs and administered by SPT DISCOs

Plus a Balancing Mechanism to settle contract deviations

CPPA G

MO SPS IAA

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CPPA G Transition to the CTBCM

CPPA G

1. Settlement and

Invoicing

2. Procurement from

PPAs (Agent)

3. New Capacity

Procurement

Market Operator:

centralized market services

Special Purpose Suplier: non

“bilateralized “PPAs procurement

Independent Auctions Administrator:

new capacity procurement facilitator

Ring fence Legal

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Bilateral Contract Market with Balancing Mechanism

DGBilateral Contracts

Settlement and Payments

MO

Sale / Purchase Differences

Ph

ysical differen

cesP

hys

ical

dif

fere

nce

s

Invoicing and Payments

Balancing Mechanism

Bilateral Market

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New Market Model – Features

Capacity Obligations

Non Payment Risks

Grid CodeCommercial Code, others

BME & BMC

Contract Registrar

Centralized New Capacity Procurement

Service Providers

K ElectricMarket

Participants

New PPAs

Competition for and in the

Market

Existing PPAs

Credit Cover (collateral)

Low Performing

Discos

Agent separated from MO

Centralized Economic Dispatch

MO

Moving from Single Buyer towards Bilateral Contracts

• In an Electricity Market, whenever there is more than one buyer, there will be imbalances

• These imbalances are settled through Balancing Mechanism

55www.cppa.gov.pk

How Balancing Mechanism Works

BME

56

Contract

Consumption

Imbalance

Imbalance Price

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Balancing Mechanism

• The Balancing Mechanism is a process of clearing the deviations of the market participants from the contract values

• Alternatively, the Balancing Mechanism can also be defined as the process of measuring the imbalance among the contracted quantities and actually Generated/demanded quantities and clearing those imbalances using certain prices.

• The establishment of a balancing mechanism is a pre-requisite for a competitive bilateral market in Electricity

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Types of Balancing Mechanisms Proposed in CTBCM

• There two types of Balancing Mechanisms proposed in the CTBCM• Balancing Mechanism for Energy (BME)• Balancing Mechanism for Capacity (BMC)

• The BME is designed to clear the imbalances in the Energy Market. The BME always leads to zero sum.

• The BME measure the differences among contracted energy and actually Generated/demanded energy (MWh) and clears the differences at a price i.e. marginal price

• The BMC is designed to clear the imbalances in the Capacity Market. The BMC doesn’t always leads to zero sum.

• The BMC measures the differences among contracted capacity and Actual available Capacity/Actual demand(MW) and clears the differences at a price.

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59

Types of Supply Contracts

• Participation in the BME/BMC depends on the type of contract

• Three types of Supply contracts are discussed here• Generation Following Supply Contracts• Load Following Supply Contracts• Financial Contracts with fixed quantities• Capacity & Associated Energy Supply Contracts• Capacity only Supply Contracts.

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Integrated Electricity Market Simulation Model (IE-MSM)

• CPPA-G has been working on the state of the art tool to simulate the future operation of the power system

• Detailed modelling has been completed and marginal cost and indicative total costs of the market calculated

• Simulation of Contracts: An inhouse tool developed for simulation of the future contracts based on the results of the simulation tool

www.cppa.gov.pk

-

50

100

150

200

250

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Ener

gy (

TWh

)

Hydro PV Wind Nuclear Bagasse Indg. Gas RLNG Imp. Coal Dom. Coal RFO

0

2

4

6

8

10

12

14

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

SRMC (Rs/kWh) Per Unit Avg VC (Rs/kWh)

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Rs/

KW

h

Per Unit VC Rs/KWh Per Unit FC Rs/KWh Per Unit Total Rs/KWh

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Gen

erat

ion

(G

Wh

)

PV Wind

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Marginal Cost

0

2

4

6

8

10

12

14

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

RS/

KWH

SRMC - Annual

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

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

Mill

ion

PK

R

(Year)

Income-PPA Income-LF Contract Income-LF Contract Avg

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 8500

Solar Wind Hydro Biomass

Long and Medium

Term Demand

Forecast

Short Term Demand

Forecast

Transmission Network

Candidate Plants

(Investment Data)

Existing Generation

Fleet (Operational

Data)

Other Inputs

Market Price Discovery and Projection

** SDDP licenses acquired

* WASP, OptGen, Plexos

*** NCP

NTDC NPCCCPPA NPCC

Long, Medium and Short Term Tools

Outputs

IGCEP*Price

Projections*Unit

Commitment***

Dispatch

Optimization*

Long Term Medium Term Short Term

Market Simulations-SDDP• SDDP (Stochastic Dual Dynamic Programming) is

state of the art dispatch optimization tool• Developed by PSR Brazil (a renowned consultant in

Energy Modelling and cost optimization)• Used in more than 70 countries• Inputs:

• Demand (PMS and Regression) prepared by DISCOs and NTDC

• Existing System (Installed Capacity with other techno-economic data)

• Future Expansion (IGCEP) prepared by NTDC

• Output:• Generation Cost (Fuel+Variable O&M) based on optimal

dispatch• Marginal Price in the System• Total cost of the system (calculated outside the tool

Marginal Cost

Total Generation Cost

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Firm Capacity Factor of VRE Plants

• Firm Capacity Factor or Capacity Value is a widely used metric of performance of an

electricity generation resource.

• Different kind of analyses are done worldwide to estimate / allocate a capacity factor

to VRE sources in order to consider them for resource adequacy1.

• Markets that allocate firm capacity factor to VREs:

• PJM, ISO-NE, NYISO, MISO etc…

• FCAT – a tool developed to estimate firm capacity of PV and Wind generation in our

system according to two methods

• (i) peak hours load

• (ii) most thermal requirement hours

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Firm Capacity Allocation Tool - FCAT

• An excel based tool designed to simulate the contribution of intermittent resources to

the security of system.

• The tool is capable to calculate the average contribution of intermittent resources to

the security of the system under different assumptions.

• In this first analyses, two techniques have been used to determine the contribution of

VRE in the capacity required to met demand.

• The purpose of this analysis and tool is to evaluate different options and to select the

one option that better suits the technical as well as commercial objectives in the

market

• (Results on next slide)

www.cppa.gov.pk

Allocation of PPAs

• GoP decision to transform the power sector of Pakistan from Single Buyer to Competitive

structure.

• This transformation requires that the contracts that have been signed by a single buyer i.e.

CPPA-G at present (previously by NTDC and WAPDA) on behalf of demand representing

entities (DISCOs at present) be bilateral-zed.

• Factors to be considered for bilateralization of contracts

• Share of each DISCO based on capacity, energy, load factor, historical vs future patterns etc.

• To find an optimum way to cater for such questions, an excel based tool is developed by

CPPA-G known as the Electricity Cost Allocation Tool (ECAT)

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Electricity Cost Allocation Tool - ECAT

• ECAT is an excel based tool which, given the demand (energy and peak demand)

inputs (historical and forecasted) for each DISCO and KE and the expected system

costs, is able to:

• Calculate the per-DISCO charges of the current allocation scheme

• Scenarios based allocation factors for energy and capacity

• Expected energy imbalances and price of imbalance

• As a summary, the tool can help the user to quantitatively measure the impact of the

different allocation methodologies assumed on a per-DISCO basis.

www.cppa.gov.pk

ECAT Interface

Market Contracts Analysis Tool• Financial Analysis is required before making any investment

• PPAs with Secured Payments-doesn’t face market price risk

• Market Based contracts incorporate risk factors-Face Market Price volatility risk

• Marginal Price is used as reference to assess the revenue availability in the market

• Basic Principle: In a perfectly functioning market, the recovery of all revenues through marginal price in each period shall be enough to cover all costs and ensure sufficient return on investment• If this is the case, Generators can consider to enter as merchant

• In not, will look for other sources of revenues

75

Types of Contracts

• Participation in the BME/BMC depends on the type of contract

• Three types of contracts are discussed here• Generation Following Contracts

• Load Following Contracts

• Supply Contracts with Fixed Quantities

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www.cppa.gov.pk

PART – VIITake-aways/Recommendations

Approval of Wholesale Market Design

Competition for the Market

Competition in the Market

Alignment of Framework (Regulations)

Legal Constitution NEPRA Act 2018 Electricity Act 1910

PolicyNational Electricity

Policy & PlanPower Policy 2013 1994, 2002, 2015

RegulatoryMarket Rules, Power Procurement Rules

Grid, Commercial and Distribution Codes

Wheeling, Competitive Bidding, Import Regulations

Generation IPPs Public Sector K-Electric

TransmissionTransmission Network

Operator (TNO)System

Operator (SO)Planner

Metering Service Provider

System

OperatorSupply = Demand Operational Planning

MarketOperator

Agency Role Billing & SettlementMarket & Product

Development

DistributionDistribution Wire

Business (Regulated)Sales or Supply Business

(Competition)Metering Service

Provider (Regulated)

Markets Transition Single Buyer Single Buyer PlusCompetitive

Wholesale & Retail

Paki

stan

’s E

lect

rici

ty M

arke

t Fr

amew

ork

Market Transition within a Framework

Vertically Integrated

Alignment of Legal Policy & Regulatory Framework

Alignment of Institutional Roles & Responsibilities

Gradual Markets Transition Comparison

83

Gradual Markets Transition Comparison Contd…

84

20172023-2025

NewNEPRA Act,includingMarket Law

2020

• Market based contracts are implemented

• BPC threshold reduced that enhances retail competition

• A separate roadmap to bifurcate DISCOs licenses implemented

• The capacity in long-term PPAs will also come in balance

2018-2020

• Wheeling arrangementsunder NEPRA 2016 Regulations make operational

• Roadmap for developing wholesale market implemented

• Competitive Wholesale Market starts with a Balancing Mechanism

• Provides the Market Price• Retail Competition for

BPC can also commence

2020 -2023

• Electronic Trading Platform for Bilateral Trading may start

• At the same time Reverse E-auctions may commence

2026 onwards

• Evolution in to Spot Market

Completive Power Market Stages Planned

Lack of an agreed “best practice” design of the markets

Central clearing in a pool

Nodal prices

Capacity and energy market

ISO + independent trans. firms

Financial rights point-to-point

Bilateral markets

Single /zonal prices

Energy only

TSO + Power exchanges

Physical rights on flowgates

And others And others

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Progress Update on Market Development

Most Important & Most Difficult to

Build a Common Vision and Recruit People:

• Collaboration with LUMS

• International Trainers Engaged

• International Collaboration

• Numerous consultations

• Communication through media

Computer & Communication Monster (C&C):

• Wholesale smart metering project underway

• Automation of SO and MO process 80% complete

• SCADA upgrade underway

• Dispatch optimization & simulation tools implemented

• DISCOs IT roadmap also prepared

Transition requires alignment of whole legal,

policy, regulatory and institutional alignment:

• Act amended and provide legal basis

• Market Model and Roadmap under approval

• Market Development Policy proposed

• Regulations are under review

• Institutional re-structuring underway

Market Operator is leading the design and

implementation program:

• Central facilitation and lead role

• Market Implementation Support Committee

• PMO office in CPPA

• Electricity Market Team (EMT)

People Technology

Process Central Lead Role

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New Market: Challenges

New Culture New HR Approach

New Capacities New Accountability

New Technologies New Efficiency

NEPRA - CPPA

Key role

PromotingMonitoringCoordinatingTraining Disseminating

www.cppa.gov.pk

Information Publishing: Marginal Cost

0

2

4

6

8

10

12

14

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

RS/

KWH

SRMC - Annual

www.cppa.gov.pk

Market will not solve all Issues

o Market will not solve all the issues

o Will create pressure to improve business across the supply chain

to improve on:

o Demand forecasts

o Generation Planning

o Optimized Dispatch

o Data Institutionalization & Publishing

o Improved Transmission Network (publishing prices with and without

constraints)

o Re-structuring MO

o Aligned and predictable legal and regulatory framework

o Market contracts & Transparency

o Strengthening SO, DISCOs etc…..

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Recommendations / Next Steps/ Take-aways

o Work together.

o Form Associations

o Form working groups

o Consultations

o Cpapcity Building

o Cooperation

Part – VIIIComments / Feedback

92www.cppa.gov.pk

Thanks

www.cppa.gov.pk

NPCC• Strengthening of System Operator in terms of people, process and technology

• Improvement in process and structure

• Data Institutionalization, IT Applications and Systems

• Improvement in Unit Commitment and Dispatch Functions, Forecasting and other allied Technical Functions

• Capacity Building of SO to Participate in CTBCM

• Plan for Obtaining System Operator License

• Formation of Joint Working Group

Actions to be covered in Detailed Implementation Plan

www.cppa.gov.pk

NTDC• Grid Code Amendment

• Connection Agreements

• SMS Metering on the CDPs

• Data Institutionalization

• Strengthening of Demand Forecasting Function

• Strengthening of Generation and Transmission Planning

• Capacity Building for Market Readiness

• Formation of Joint Working Group

Action to be covered in Detailed Implementation Plan

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DISCOs1. Market Implementation Groups to formation of Market Interface Departments

• Strengthening of Demand Forecasting Function and Transmission Planning

• Capacity Building on Management of Bilateral Contracts Portfolio

2. Financial Health Assessment of DISCOs and work on (a) arrangement of Bank Guarantees and credit covers for good performing DISCOs and (b) for low performing DISCOs enable AEDB/PPIB as IAA to work out details of guarantees or credit covers

3. Participation in Commercial Allocation of PPAs

4. Connection Agreement preparation

5. Transmission Plan Preparation

6. Creation of Association of DISCOs

7. Participate in Market Capacity Building Sessions

8. Detailed Report on immediate interventions required by DISCOs for CTBCM implementation [within 80 days]

Actions to be covered in Detailed Implementation Plan

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AEDB/PPIB

1. Creation of Joint Working Group (PPIB & AEDB)

2. Strengthening of PPIB/AEBD to prepare them for IAA Function

3. Gap analysis of existing HR capacity, processes and IT Systems

4. Registration with NEPRA under NEPRA Act for IAA Function

5. Analysis of security package as a whole in conjunction with approved CTBCM Model and identification of Actions and its approval

Actions to be covered in Detailed Implementation Plan

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MoE (PD)

1. Formation of Joint Working Groups

2. Promulgation of the National Electricity Policy

3. Review and modification of the existing Power Policies

4. Review and modification of the existing Transmission Policies

5. Registration with NEPRA under NEPRA Act for IAA Function

6. Analysis of security package as a whole in conjunction with approved CTBCM Model and identification of Actions and its approval

7. Modification in Existing Rules and New Rules

8. Actions on the Institutional Roles, IAA Formation, SO License etc.

Actions to be covered in Detailed Implementation Plan

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NEPRA

1. Formation of Joint Working Groups

2. Approval of Updated CTBCM Implementation Roadmap and Detailed Design

3. Review and modification of the existing Regulations and new Regulations

4. Review and modification of the existing Guidelines, Codes, SOPs etc. for alignment with approved market model

Actions to be covered in Detailed Implementation Plan