Agenda Historical Perspective of Market Development in Pakistan - - PowerPoint PPT Presentation

CONSULTATIVE WORKSHOP

ON

COMPETITIVE WHOLESALE POWER MARKET DESIGN AND WAY FORWARD

www.cppa.gov.pk

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 – I

Historical Perspective of Market Development in Pakistan

3 www.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 PE PEPC PCO

• Transition

Management Company

• Oversee the

corporatization & privatization

• Formed Business

Plan for Restructuring process

GEN GENCOs (4) (4) DISC DISCOs (10) (10) 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

• peration 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

His istorical l on

• n Mar

arket De 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 prepare

CTBCM 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

• f 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

www.cppa.gov.pk

2019

• NEPRA Approved

CTBCM Model

www.cppa.gov.pk

Government of Pakistan

MoE (Power Division) Pakistan Atomic Energy Commission

NEPRA (Regulator) Private Sector

WAPDA AEDB PEPCO PPIB CHASHN UPP KANUPP IPPs SPPs/ CPPs K- Electric Mega Dams Water Projects GENCOs DISCOs NTDC (TNO+SO) CPPA-G

Overview: Market Operator in the Electricity Market

MO Licensees Ownership Ownership Market Participant Service Providers SO + TNO

Ministry of Water Resources

Ele lectricity Mar arket: Se Service Providers an and Par articip ipants s

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

www.cppa.gov.pk

Legal

NEPRA Act 2018 Electricity Act 1910 Constitution Parliament

Policy

National Electricity Policy & Plan Power Policy 2013 1994, 2002, 2015 CCI/MoE

Regulatory

Market Rules, Power Procurement Rules Grid, Commercial and Distribution Codes

Wheeling, Competitive Bidding, Import Regulations etc

NEPRA

Generation

IPPs Public Sector K-Electric Regulated to Competition

Transmission

Transmission Network Operator (TNO) System Operator (SO) Planner NTDC Regulated Service Provider Metering Service Provider

System Operator

Supply = Demand Operational Planning NPCC Regulated Service Provider

Market Operator

Agency Role Billing & Settlement Market & Product Development CPPA Regulated Service Provider

Distribution

Distribution Wire Business (Regulated) Sales or Supply Business (Competition) Metering Service Provider (Regulated) DISCOs/KE

Markets

Single Buyer Competitive Wholesale Competitive Retail

Increase Competition

Pakistan’s Electricity Market Framework

Ele lectricity Market Fr Framework

Reliable Grid

www.cppa.gov.pk

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

www.cppa.gov.pk

www.cppa.gov.pk

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

www.cppa.gov.pk

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

www.cppa.gov.pk

(BME + BMC) Balancing Mechanism ERP Data Inst. SFS Cost Opt. Tools MP App CDXP Monitoring Portal

CPPA’s IT Enablement for Competitive Market Operations IT Enablement for Future SPS Function IT Enablement for Future MO Function

DR Site Data Center

www.cppa.gov.pk

www.cppa.gov.pk

Electricity Market Team

www.cppa.gov.pk

EMP Program 2018

Part – II II

Mar arket De Develo lopment (GoP’s Dec Decisio ions an and NEP EPRA Act ct 201 2018)

18 www.cppa.gov.pk

www.cppa.gov.pk

• 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

www.cppa.gov.pk

NEPRA Act ct 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

www.cppa.gov.pk

NEPRA Act ct 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

www.cppa.gov.pk

NEPRA Act ct 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

www.cppa.gov.pk

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 – III III

Mar arket St Structures Evolutio ion in Pak akistan

24 www.cppa.gov.pk

Sin ingle Buyer Market Str tructure

Sin Single le Bu Buyer: r: Means only one Buyer can purchase power Bu Buyer: r: Central Power Purchasing Agency Guarantee (CPPA-G) Ltd as an agent on Behalf of DISCOs

www.cppa.gov.pk

Generators CPPA-G DISCOs Invoices CTR & ETR Payments

Current Str tructure: Sin ingle Buyer Plu lus Market

Sin Single le Buyer r Plu lus: Means where BPCs can purchase directly from Generators as well as DISCOs are also allowed to purchase bilaterally from generators apart from single buyer

www.cppa.gov.pk

Generators CPPA-G DISCOs Invoices CTR & ETR Payments BPCs Wheeling Regulations 2016

CT CTBCM: Commercial Operations Oct ct 2021

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

www.cppa.gov.pk

Generators CPPA-G DISCOs Invoices CTR & ETR Payments BPCs Wheeling Regulations 2016

www.cppa.gov.pk

CTBCM: Technical and Commercial Transaction in Proposed Wholesale Market

G G

Transmission System

Distribution System

Non-Eligible Consumer (<1 MW) Eligible Consumer (>=1 MW)

Consumers 𝑄𝑄𝑄 = 𝐹𝑄𝑄 + 𝐷𝑄𝑄𝑄 𝑉𝑝𝑇𝐷 + 𝑁𝑝𝐺 𝐸𝑁 𝑄𝑄𝑄 + 𝑉𝑝𝑇𝐷 + 𝑁𝑝𝐺 + 𝐸𝑁

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 G S

Eligible Consumers

Contract = Actual Actual Contract Balancing Mechanism BME + BMC

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

$$

Part – IV IV

Preparation of CTBCM & Its Approval & Actions for NTDC & NPCC

29 www.cppa.gov.pk

www.cppa.gov.pk

• 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

www.cppa.gov.pk

• 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

www.cppa.gov.pk

Tim imelines – Market Reforms

Jan Feb Mar Apr May

Jan 2020

Stakeholder Consultations (Plan Update + Detailed Design)

Feb 2020

Submission to NEPRA by Feb 5 (Updated Plan + Detailed Design Reports)

Mar 2020

Submission to NEPRA by Respective Entities by Mar 5 (Plans Detailed Reports)

May 2020

Updated CTBCM Plan approved by NEPRA

1.5 Years

Nov 2021

April - May 2020

Internal approvals of Budgets by respective entities’ Boards

18 Months

Implementation of CTBCM Plan by respective entities & Centralized Support + Monitoring

Oct 2021

Commercial Operation Date of CTBCM

www.cppa.gov.pk

• Actions within 60 Days: CPPA to coordinate and update Implementation Plan and Detailed Design

after 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

Act ctions fr from th the Deci cision of th the Authority and Approved Market Model

Directions given in the approved Model Directions given in the Decision Part and approved Model

www.cppa.gov.pk

• 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

Act ctions fr from th the Deci cision of th the Authority

www.cppa.gov.pk

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

Dir irections in in CT CTBCM Approval Determination for CPPA

www.cppa.gov.pk

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

Dir irections in in CT CTBCM Determination for NTDC

www.cppa.gov.pk

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

Dir irections in in CT CTBCM Determination for NPCC

www.cppa.gov.pk

• MoE (PD)
• NEPRA
• DISCOs
• AEDB/PPIB

Act ctions for Oth ther Enti tities

Im Imple lementatio ion Roadmap

39 www.cppa.gov.pk

40

No. GROUP OF ACTIONS Stakeholders directly involved No. GROUP OF ACTIONS Stakeholders directly involved Implementation 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 11 Strengthening 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 12 Strengthening Discos credit worthiness and readiness as market participants Discos & MWP as the owner

• f 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

• bligations

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 6 Separation of CPPA G into Market Operator and Special Wholesale Supplier Functions CPPA G 15 Measures to enhance wholesale payment culture: credit cover mechanisms and payment system CPPA G/Market Operator Discos MWP IAA 7 Creation of the Market Operator as a separate company CPPA G in particular Market Operator Business Unit 16 Readiness for commercial operation of electricity market: Lead by CPPA G, includes all market participants; CPPA G reporting of readiness tests and results 8 Creation of the SPS as purchaser of not yet not assigned PPA/EPA CPPA G in particular SPS Business Unit; Discos 17 Declaration of date to start commercial

• peration 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 – V

Im Implementatio ion Co Coor

• rdin

ination as as Proposed an and Approved in n CTBCM Model

41 www.cppa.gov.pk

Joint Secretary Power Finance (Convener MIMG)

CPPA-G MISC + Secretary MIMG as Member Executive Management NPCC NTDC DISCO’s MIMG Member NEPRA Member Executive Management Universities K-Electric Generators

Support Staff in MoE

www.cppa.gov.pk

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 – VI VI

CTBCM De Detailed Desig Design

43 www.cppa.gov.pk

www.cppa.gov.pk

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?

Gate Closure Gate Closure

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

Mar arket Openin ing Benefits

• Stimulate ap

appropria iate in infr frastructure in investments from private sector

• Competition provides cu

customers with ith ch choices

• Achieve efficie

iency both in energy and economic terms

• Pressure on Pric

rice / Adequacy through competition

• Create the conditions for a fair all

llocation of

• f risk and benefit sharing between

investors/sellers and buyers/consumers

• St

Standard products ts traded in market enhancing liquidity

• Level the playing field; removing confli

lict of

• f interest to facilitate entry of new

investors and participation of private players, including Bulk Power Customers

• Ensure tr

transparency and predictabili lity

www.cppa.gov.pk

Mar arket De Design Objecti tives - CT 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 f existing Le Legal and Regulatory ry 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.

www.cppa.gov.pk

www.cppa.gov.pk

Products

• Energy
• Firm Capacity

www.cppa.gov.pk

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

www.cppa.gov.pk

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

www.cppa.gov.pk

Bilateral Contract Market with Balancing Mechanism

D G

Bilateral Contracts Settlement and Payments

MO

Sale / Purchase Differences

Physical differences Physical differences Invoicing and Payments Balancing Mechanism Bilateral Market

www.cppa.gov.pk

New Market Model – Features

Capacity Obligations Non Payment Risks Grid Code Commercial Code, others BME & BMC Contract Registrar Centralized New Capacity Procurement Service Providers K Electric Market 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

55 www.cppa.gov.pk

How Balancing Mechanism Works

BME

56

Contract Consumption Imbalance Imbalance Price

www.cppa.gov.pk

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

www.cppa.gov.pk

Types of f Balancing Mechanisms Proposed in in CT 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.

www.cppa.gov.pk

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.

www.cppa.gov.pk

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

Energy (TWh)

Hydro PV Wind Nuclear Bagasse

• Indg. Gas

RLNG

• Imp. Coal
• Dom. Coal

RFO 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/KWh

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

Generation (GWh)

PV Wind

www.cppa.gov.pk

Marginal Cost

2 4 6 8 10 12 14 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 RS/KWH

SRMC - Annual

1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 1 2 3 4 5 6 7 8 9 10 11 12

Million PKR (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% 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 NPCC CPPA 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

www.cppa.gov.pk

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

www.cppa.gov.pk

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
• ne 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)

www.cppa.gov.pk

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

www.cppa.gov.pk

www.cppa.gov.pk

PART – VII

Take-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

Policy

National Electricity Policy & Plan Power Policy 2013 1994, 2002, 2015

Regulatory

Market Rules, Power Procurement Rules Grid, Commercial and Distribution Codes

Wheeling, Competitive Bidding, Import Regulations

Generation

IPPs Public Sector K-Electric

Transmission

Transmission Network Operator (TNO) System Operator (SO) Planner Metering Service Provider

System Operator

Supply = Demand Operational Planning

Market Operator

Agency Role Billing & Settlement Market & Product Development

Distribution

Distribution Wire Business (Regulated) Sales or Supply Business (Competition) Metering Service Provider (Regulated)

Markets Transition

Single Buyer Single Buyer Plus Competitive Wholesale & Retail

Pakistan’s Electricity Market Framework

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

2017 2023- 2025

New NEPRA Act, including Market 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 arrangements

under NEPRA 2016 Regulations make

• perational
• 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

• nwards
• Evolution in to

Spot Market

Completive Power Market Stages Pla lanned

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

www.cppa.gov.pk

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

www.cppa.gov.pk

New Market: Challenges

New Culture New HR Approach New Capacities New Accountability New Technologies New Efficiency

NEPRA - CPPA

Key role

Promoting Monitoring Coordinating Training Disseminating

www.cppa.gov.pk

Information Publishing: Marginal Cost

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

• Market will not solve all the issues
• Will create pressure to improve business across the supply chain

to improve on:

• Demand forecasts
• Generation Planning
• Optimized Dispatch
• Data Institutionalization & Publishing
• Improved Transmission Network (publishing prices with and without

constraints)

• Re-structuring MO
• Aligned and predictable legal and regulatory framework
• Market contracts & Transparency
• Strengthening SO, DISCOs etc…..

www.cppa.gov.pk

Recommendations / Next Steps/ Take-aways

• Work together.
• Form Associations
• Form working groups
• Consultations
• Cpapcity Building
• Cooperation

Part – VIII

Co Comments / Fee eedback

92 www.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

Act ctions to be covered in in Detailed Im Implementation Pla lan

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

Act ction to be covered in in Detailed Im Implementation Pla lan

www.cppa.gov.pk

DISCOs

1. 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]

Act ctions to be covered in in Detailed Im Implementation Pla lan

www.cppa.gov.pk

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

Act ctions to be covered in in Detailed Im Implementation Pla lan

www.cppa.gov.pk

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.

Act ctions to be covered in in Detailed Im Implementation Pla lan

www.cppa.gov.pk

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

Act ctions to be covered in in Detailed Im Implementation Pla lan