By on 11 Aug 2020
Authored by – Partner Apoorva Misra and Associate Soumya Prakash
Real-time Electricity Market (RTEM) is an attempt by the Central Electricity Regulatory Commission (CERC) to create a platform that can help address and balance the power supply-demand scenario in the country. RTEM is an organized market platform to enable buyers and sellers across India to meet their energy requirements closer to real-time operation. It is intended to act as a tool to mitigate and address challenges to grid management due to the intermittent and variable nature of renewable energy generation and help integrate higher quantum of renewable energy resources into the grid.
Key objectives of the RTEM platform
The aim to launch RTEM is to provide an alternate mechanism for the distribution companies to access and manage their power demand on a larger platform. The press release issued by Ministry of Power on the launch of RTEM stated that “The Government of India has set a target of attaining 175 GW in renewable capacity addition by 2022 by driving accelerated renewable penetration pan-India. Shorter bidding time, faster scheduling, and defined processes (e.g. gate closure) are expected to enable the participants to access resources throughout the all-India grid, promoting competition. It would lead to better portfolio management by the utilities with efficient power procurement planning, scheduling, and imbalance handling.”
With the introduction of RTEM in India, generating companies can sell their un-requisitioned capacity in order to enable efficient use of such generating power plants. As reflected from the Statement of Reason (SOR) issued along with the amendment regulations, CERC is of the view that participation in RTEM should not only be limited to those participants who have participated in the day-ahead collective transactions, as in cases of long term PPA holders who typically self-schedule their capacities on a day-ahead basis. Therefore, CERC expects the State Commissions to implement Scheduling, Metering, Accounting and Settlement of Transactions in Electricity (SAMAST) in the states to let intrastate entities participate in RTEM.
Additionally, generators having long term PPAs with distributing companies can be allowed to participate in RTEM as this would help distribution companies to address and manage the variability of RE generation. Besides, on the issue of ramping up constraints (increasing the generation capacity) as highlighted by the stakeholder, CERC is of the view that the generating companies should consider and submit the bids for the quantum of power to be injected after considering ramping and other technical capabilities. Regulations have been amended to allow the generating companies with long term PPAs to access the power market through RTEM for transacting their un-requisitioned surpluses.
In this regard, CERC has provided that the generating companies whose tariff is determined under section 62 of the Electricity Act, 2003 (Act) and are willing to participate in this market, will have to share the net gains (after accounting for the energy charge) with the distribution companies in the ratio of 50:50 subject to a ceiling of share of 7 paise/kWh to the generating company and the balance to the beneficiary. This mechanism aims to provide adequate compensation to both buyers and sellers participating in the market. The distribution companies also have the option to sell power in the RTEM for which the entire net gains will be retained by such distribution company. However, generating companies falling under section 63 of the Act, will have to sign a supplementary PPA based on mutual agreement between the generator and the buyer.
Functioning of the RTEM
CERC vide a suo-moto order dated May 28, 2020, stipulated methodology of allocation of transmission corridor to the power exchanges for RTEM. National Load Despatch Centre (NLDC) has been entrusted with the responsibility to announce the available transfer capacity for RTEM transactions. Both the power exchanges, therefore, will have to allow trading of electricity considering the notified available transfer capacity. The initial market clearing volume derived in this process shall be submitted to NLDC, which shall verify the combined volume cleared in both exchanges against the available transfer capacity for RTEM. If the combined cleared volume of both the power exchanges is within the available transfer capacity for RTEM, transaction will be allowed by NLDC. However, in an event the combined volume exceeds the available transfer capacity for RTEM, the allocation of available corridor margin between the two power exchanges shall be in the ratio of the initial market clearing volume of RTEM in the respective power exchanges. The power exchanges shall thereafter submit the final trades in conformity with the available corridor margin as provided by the NLDC. It is intended that this entire process will be completed within a single time block i.e. within 15 minutes.
Further, CERC has provided detailed instructions on how RTEM trading is to be conducted and ordered for the complete records of transactions on monthly basis to be compiled and examined by the NLDC. With the approval from CERC, the Power Exchange India Limited (PXIL) and Indian Energy Exchange (IEX) had started the RTEM trading platforms for electricity transactions from June 1, 2020.
How does the platform work?
As per the regulations and guidelines, RTEM would be opened every 30 minutes in a day, based on double-sided closed auction with uniform price. The concept of ‘gate closure’ has been introduced for bringing in the desired firmness in schedules during the hours of market operation. Buyers or sellers shall have the option of placing buy or sell bids for each 15-minute time block.
There will be 48 auction sessions during the day with delivery of power within one hour of closure of the bid session. This would aid distribution companies to manage power demand-supply variation and meet 24×7 power supply needs in a better manner.
Along with the implementation of RTEM, detailed rules with provisions relating to price discovery mechanism, timelines, bidding formats, enabling generators to buy back power in case of forced outage, etc. are to be prepared suitably by the power exchanges as per the amended Regulations. Till the issuance of such procedures, the distribution companies are required to follow the current practice if they so choose to sell their share of capacity in a generating station in the RTEM. Therefore, appropriate mechanism is awaited to be issued by the power exchanges for stable payment structure so that the initiative taken is not misused and inefficiencies are addressed.
By introducing RTEM, India has joined the league of a handful of nations to have such a market. While the generating companies and distribution companies can manage their power supply and purchase arrangement more optimally, it will likely result in the optimization of power purchase cost and serve the consumers with a reliable supply of power. RTEM will not only provide easy access for sale and purchase of electricity throughout the country but will also be a platform for the trade of power, which will augment sale of electricity with the neighboring countries by creating a common pool for cross border market.