Design of competitive electricity market in India NCAER.
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Transcript of Design of competitive electricity market in India NCAER.
Pre-reform structure
Vertical integrated utility (State Electricity Boards)
Regional Load Despatch centres, Transmission utilities (Power grid corporation)
Problems relating to governanceUnder priced supply of electricity to rural areas
Theft and losses prevalent in urban areas
Post reform structure
Separation of generation, transmission and retail businessElectricity Act 2003 enacted
Reforms with a focus on governance
Need for reforms
Total installed capacity 1.28 lac MW
• Total generation more than 600 billion kWh - 5th largest producer worldwide
Northern region - 27%; Western region - 28%; Southern region - 29%; Eastern region - 14%; North-eastern region - 2%
• Transmission and distribution network 6.3 million circuit kms
Hydro-thermal mix fell from 46:54 in 1966 to 25:71 as of today and projected to fall to 21:79 in 2010.
Current status of power sector
Potential of 1.5 lac MW of hydro-electric capacity yet to be exploited
Cross-subsidy in tariffs to be phased out
Difference between industrial and domestic tariffs is falling
Unbundling of integrated utilities e.g.:
Karnataka Power Corporation
Karnataka Power Transmission Corporation Ltd.
Distribution Companies
APDRP formulated to make distribution utilities commercially viable, reduce ATC losses, reduce outages and interruptions and increase consumer satisfaction.
Facilitating power exchange
Availability based tariff for central sector utilities
fixed charge
energy charge per kWh
Charge for Unscheduled Intercharge (UI)
UI rate schedule
0
100
200
300
400
500
600
frequency (Hz)
pais
e/k
Wh
North
West
South
East
North-East950 MW
1650 MW
3000 MW1000 MW
1200 MW
500 MW
Project North-East to North and West - 1800 km HVDC line from Biswanath Chariali in Assam (close to Arunachal Pradesh) to Agra in Uttar Pradesh through 800 KV lines with capacity upto 6000MW
Transfer capacities across regions
Open Access
Central sector shares - pseudo long-term bilateral contracts in forward energy market
Access to transmission based on transmission fee and a surcharge
Relevant regulations: CERC regulation No.L-7/25(1-4)
In cases of congestion in corridors, bidding mechanism for short term open access @ http://203.200.81.7/ebid
Traders facilitate power transfers for a fee
North-east #
Malda
BongagaonSalakati
Birpara
220 KV 400 KV
DehriMughalsarai
220 KV
SasaramAllahabad
500 MW
Vindhyachal
SingrauliAuraiya
MalanpurKorba
Budhipadar
Rourkela
Raipur
Jeypore
Gazuwaka
Kolar
500 MW
Balimela
Upper Sileru
2000 MW
220 KV
Belgaum
KolhapurChandrapur
Ramagundam
1000 MW
220 KV
400 KV
220 KV
North #
West #
South #
East #
HVDC back-to-back link
HVDC bipole
Existing link
New approved scheme
Legend
Electricity forward market
The forward transmission market
The spot energy market
The forward energy market (market for bilateral contracts)
The forward market for reserves
Electricity futures and options
F in a n c ia l in s tru m e n ts fo r e le c tr ic ity m a rk et
N Z F O E (N ew Z e a la n d)E E X (G e rm a n y)
N o rd P o o l (S ca n d in a v ia )S F E (A u s tra lia )
W itho u tp h ys ica ld e live ry
(f in a n c ia l)
N Y M E X (N e w Y o rk )IP E (U K )
W ithp h ys ica ld e live ry
F u tu res
N o rd P o o l(S ca n d in a v ia )
W itho u tp h ys ica ld e live ry
(f in a n c ia l)
C a lP X(C a lifo rn ia )
W ithp h ys ica ld e live ry
F o rw a rds
N o rd P o o l(S ca n d in a v ia )
N Y M E X(N e w Y o rk )
O p tio ns
N o rd P o o l(S ca n d in a v ia )
Z o n a l P riceM a rg ina l s ys tem p rice
Z o n a l p rice fu tu res
NEMMCO in Australia operates eight separate markets for the delivery of frequency controlled ancillary services (FCAS) and purchases network control ancillary services (NCAS)
Integrated systems
Unbundled systems
Middle path or ‘third way’
Unit commitment schedules
Economic despatch schedule
shadow prices of system constraints as basis for transactions
security constrained economic despatch as true nodal prices of energy
Congestion in transmission relieved by physical instructions
Sequential and repeated markets for energy, transmission and reserves
Repetition ensures market convergence
Sequential markets to yield complete convergence
Transmission congestion relieved by setting locational nodal prices
Under the condition of complete markets, the integrated and unbundled systems will produce the analogous primal-dual equivalence of outcomes.
Unit Commitment schedule
start up and shut down conditions
spinning reserve
ramp up limits
Power dispatch schedule
real power balance
reactive power balance
Voltage limits
Transmission limits
Energy constraints on hydro plants
Energy markets
Transmission markets
Ancillary markets
“smart” market Decentralised operations
Auctions
First price sealed bid auction Vs Ascending auction
If bidder’s information is independent then all auctions are equally good
Ascending auctions more profitable than standard (first price) sealed bid auctions in expectations if the information is afflicted
Designs should facilitate entry and discourage collusion
Transmission utility pricing and rights
Financial transmission rights (FTRs) or flowgate rights (FGRs) in US as derivatives with values for network transmission capacity in power flow models
FTR holder gets a share of the congestion payment surplus that is received by the ISO when a transmission constraint is binding.
Flowgate rights are linked based transmission rights for hedging transmission risks - settled at the prevailing shadow prices of a security constrained economic despatch model.
Zonal prices in Europe under market splitting mechanism
Power Exchange
Independent System Operator
Day Ahead Market
Real Time Market
Generators Transmission Traders Retailers Distribution
companies
Large consumers
Regulated consumers
Bids
Contracts
Transmission
PE-ISO - A possible structure
Power exchange and ISO as co-joined entity
PE to conduct national wholesale electricity market : Day Ahead Market (DAM) and the Real Time Market (RTM)
Distinct functions of electricity markets:
Physical operation of maintaining reliability and stability of the system (ISO)
Economic operation of managing energy markets (PE)
Commercial operation of settlement and conciliation of the obligations contracted in the market (PE)
PE runs competitive auctions on non-discriminatory basis
Sellers
Central sector Units; State level utilities
Merchant owned units
Buyers
State level retail utilities;
Transmission utilities
Transmission traders
In event of congestion in transmission corridors, auctions will be held to determine the rights of way
Long term bulk contracts finalised by utilities using multi round auction to get the best deal from wholesale sellers.
Central Transmission Utility as nodal ISO along with five regional transmission
utilities as associate ISOs responsible for regional balancing
At retail level, mostly levelised rate under regulation for core customers
Demand side bidding by load serving utilities in the RTM markets
Bundled generating units precludes any need for state level exchange
Coordination by state transco under the supervision of regional transco
Electricity futures and other derivatives can be developed in conjunction with commodities exchanges in India
Regulation through performance based incentives for generators and transmission traders and levelised tariffs with scope for profits for distribution companies
Constant monitoring of electric market imperfections and inadequacies through appropriate metrics on capacity additions, transmission congestions, etc
Structured tolling contracts as upfront premium paid to plant owner for ability to schedule the operation of the plant
Interruptible load programs
Hedging instruments as insurance schemes for risk management policies
Electricity derivatives
Financial contracts- Contracts for differences in UK and Australian power markets
Physical contracts - Contracts with short maturity period; the PJM power pool market and the energy balancing market operated by CAISO in the US.Electricity futures were first traded on the NYMEX in March 1996Mostly traded in traditional exchangesElectric swaps as financial contracts for fixed price
Electric locational basis swaps
Electricity options and swaps
Plain vanilla electricity call and put options
Options based on attributes like volume, delivery location and timing, quality, and fuel type
Exchange traded energy futures or physical transactions at major power transmission inter ties.
Spark spread options as non-standard cross-commodity electricity options with payment as the difference between the price of electricity sold by generators and the price of the fuels used to generate it
Callable and putable forwards to mimic interruptible supply contracts and the dispatchable independent power producer contracts