Expect Pricing Parity In Electricity Exchanges In A Year: Power Exchange CEO

Satyajit Ganguly, MD, Power Exchange India Ltd. (Source: Company)

Market coupling, a technical process that brings parity in pricing of electricity traded on different power exchanges, is likely to be implemented in a years' time, according to Satyajit Ganguly, MD of Power Exchange India Ltd.

The Grid Controller of India has two months' time to work on a software, after which it will be test run for four months mostly for real-time market and day-ahead market products, Ganguly told NDTV Profit in an interview.

“A report will be prepared and presented to CERC (Central Electricity Regulatory Commission) for study which will then go to stakeholders for their comments," he said. "All together it may take around 10-12 months before market coupling is implemented in India.”

India's electricity regulator has asked the Grid Controller of India to work on a mechanism to aggregate the buy and sell bids to arrive at a uniform clearing price that will be effective on all exchanges.

It means there will be only one price for the electricity that's to be traded at any point of time through these exchanges. Once implemented, the exchanges will act as a platform where only buy and sell bids will be received and power will be dispatched to the buyer.

At present, all exchanges have different trading prices that, according to Ganguly, leads to creation of monopoly for a single exchange (IEX) that benefited from starting first.

Ganguly said it's obvious the exchange that started first has more liquidity especially in double-sided closed bids. “That's the reason why IEX has a monopoly in the day-ahead-market which is a collective bid, but in term-ahead-market, which is a long-term market, we're ahead of them.”

Day-ahead-market constitutes 70-80% of the total trade taking place on the exchanges and IEX holds 98% of that market share.

Market-led pricing will provide equal opportunity to all exchanges and will improve the overall percentage of short-term electricity trading that is only 7% at present of the total power generated, Ganguly said.

Market Volumes Shifting

The market is slowly shifting towards term-ahead-market as it has guaranteed liquidity, which is triggered due to improvement in demand forecasting.

It also helps in securing optimum price compared to short term market price fluctuation. The short-term market constitutes roughly 7-8% of the total power produced in the country. The majority is sold through long term power purchase agreements, Ganguly said.

However, the exchanges have now applied for 11-month contracts, which will help them to increase the liquidity on the exchanges and may lead to softer tariff. “We have green day-ahead-market and green term-ahead-market products for renewable power and are working on newer green products which will help renewable power projects without any PPA to access our exchange to sell the power produced,” Ganguly said.