Leveraging trading through energy exchange Rajesh K Mediratta - - PowerPoint PPT Presentation

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Leveraging trading through energy exchange

Rajesh K Mediratta Director (Business Development)

Rajesh.mediratta@iexindia.com

1

• 25-year PPA - Tariff on cost-plus or competitive bid

Long-term

• 3 Month- 3 Years
• Tariff covers : Fixed Cost + Variable Cost+ Mark Up

(< long term) Medium Term

• Intraday- 3 Months to be procured through competitive

bidding only

• Single tariff covering Tariff covers Fixed Cost+

Short Term (OTC)

• Highly liquid and transparent marketplace
• More accurate load management

Day-Ahead Market

• Last-minute adjustments (Gate closure 4 hours)
• Less liquid

Intra-day

Discom’s Options For Power Procurement

2

India Power Sector I Present Market Segments

Source: CERC MMC Report

Long Term Short Term Long-term Power Purchase Agreements (PPA) Over the Counter Bilateral Trade Agreements (OTC) Effected by Licensed traders Deviation settlement/ Unscheduled Interchange

89.7% 4.8% 3.5% 2.0%

Exchanges (Only up to 11 days)

• Day Ahead

Contingency

• Daily
• Weekly
• Day Ahead Market

Short Term Power market is at ~10%, Power Exchange volume in the segment have been growing significantly

Up to 25 years OTC: Intraday to 1 year Exchanges: Intraday – 11 days Real Time 1,157,938 MU 1,038,708 MU 55,980 MU 40,032 MU 23,218 MU All values for FY17 3

Share of Short Term Market in Total Generation

25 21 19 21 23 15 17 16 24 21 24 31 29 35 41 36 35 35 35 34

5 10 15 20 25 30 35 40 45

FY12-13 FY13-14 FY14-15 FY15-16 FY 16-17

Volume (BU)

UI/DSM Direct Exchange Bilateral (trader) Share in Total Generation 10.9% 10.4% 10.3% 10.9% 9.5% Source: CERC MMC Reports

• Short term market grew at a rate with a CAGR of 9% (FY-10 to FY 17).
• Power Exchanges witnessed growth at a CAGR of 28% (FY-10 to FY 17).

4

PRICE AND VOLUME TREND IN THE POWER MARKET

5

IEX Market Segments

Day-Ahead Market

since June,08

• Delivery for next day
• Price discovery: Closed , Double-sided Auction

Term-Ahead Contracts

since Sep’09

• For delivery up to 11 days
• Daily Contracts, Weekly Contracts

Renewable Energy Certificates

since Feb’11

Energy Saving Certificates

since 27th Sept’17

Intraday Market & Day- Ahead Contingency

Round the clock since Jul’15

• Intraday: For Delivery within the same day
• Day Ahead Contingency: Another window for next day
• Gate closure : 3 hours
• Green Attributes as Certificates
• Sellers : RE generators not under feed in tariffs
• Buyers: Obligated entities; 1MWh equivalent to 1 REC
• 1 ESCert = 1 mtoe (metric Tonne of Oil Equivalent)
• Trading Session on every Tuesday of the Week
• Trading time 1300 hrs to 1500 hrs

Auction Continuous

6

Price Comparison of a typical day

0.00 1.00 2.00 3.00 4.00 5.00 6.00 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Price (Rs/kWh) 15 min time block Winter Summer

7 Winter: 18/12/2016 | Summer: 15/04/2017

High Liquidity in Volume at IEX

(Avg. Hourly Volume in MW)

1,130 1,334 1,919 2,842 4,456 4,737 4,942 4,907 5,445 698 1,302 2,371 2,539 3,956 5,741 4,689 6,434 8,806 394 704 1,347 1,571 2,554 3,302 3,212 3,878 4,541 7.23 5.19 3.56 3.54 3.49 2.80 3.51 2.73 2.41

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

MCP (Rs./kWh)

• Avg. Hourly Volume (MW)

Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) MCP (Rs/kWh)

Data as on 31st Mar’ 2017

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Monthly Market Snapshot (DAM)-Average hourly MW

2.77 2.92 2.59 2.49 3.13 4.09 4.08 3.55

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 0.00 2000.00 4000.00 6000.00 8000.00 10000.00 12000.00 April May June July August September October November MCP (Rs/kWh) Average Hourely Volume (MW) Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) Price (Rs./kWh)

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Daily Purchase and Sell bid trend November

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 1/11/2017 2/11/2017 3/11/2017 4/11/2017 5/11/2017 6/11/2017 7/11/2017 8/11/2017 9/11/2017 10/11/2017 11/11/2017 12/11/2017 13/11/2017 14/11/2017 15/11/2017 16/11/2017 17/11/2017 18/11/2017 19/11/2017 20/11/2017 21/11/2017 22/11/2017 23/11/2017 24/11/2017 25/11/2017 26/11/2017 27/11/2017 28/11/2017 29/11/2017 30/11/2017 Price per unit Million Units

Purchase Bid Sell Bid Cleared Volume Price 10

0.00 1.00 2.00 3.00 4.00 5.00 6.00 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Price per unit Million Units Purchase Bid Sell Bid Cleared Volume Price

Daily Purchase and Sell bid trend October

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Monthly Average Market Clearing Price (Rs/kWh)

2.68 2.62 2.56 2.74 2.82 3.68 3.03 2.67 2.56 2.52 2.30 2.61 2.91 2.32 2.31 2.16 2.17 2.43 2.46 2.32 2.32 2.50 2.54 2.56 2.77 2.92 2.59 2.49 3.13 4.09 4.08 3.55

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

• Avg. MCP FY15-16: Rs 2.73/kWh
• Avg. MCP FY16-17: Rs 2.42/kWh
• Avg. MCP FY17-18: Rs 3.20/kWh

Data as on 30th Sept 2017 12

15 min price trend on 11th December 2017 (Monday)

Even within the day, prices @ night are much lower, providing opportunities to the Discomsto utilize the market

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 00:00 - 00:15 00:45 - 01:00 01:30 - 01:45 02:15 - 02:30 03:00 - 03:15 03:45 - 04:00 04:30 - 04:45 05:15 - 05:30 06:00 - 06:15 06:45 - 07:00 07:30 - 07:45 08:15 - 08:30 09:00 - 09:15 09:45 - 10:00 10:30 - 10:45 11:15 - 11:30 12:00 - 12:15 12:45 - 13:00 13:30 - 13:45 14:15 - 14:30 15:00 - 15:15 15:45 - 16:00 16:30 - 16:45 17:15 - 17:30 18:00 - 18:15 18:45 - 19:00 19:30 - 19:45 20:15 - 20:30 21:00 - 21:15 21:45 - 22:00 22:30 - 22:45 23:15 - 23:30

Market Clearing Price 11-12-17

MCP

Power in night hours available below Rs 2.5/unit

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‘SMART’ Options with Distribution Companies

SMART CONTRACTING SMART PROCUREMENT

Ensuring ideal mix of long term and short term power purchase arrangements to manage fixed cost and manage availability of supply On a day to day basis- managing demand

• f the area by utilizing cheaper short term

sources by replacing power from high variable cost plants and ensuring MERIT

• rder based dispatch

Commercial decision-making

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1. SMART Procurement

• Under long term & medium term PPA : two part tariff
• Capacity charges (commitment charges): paid irrespective of whether discom

purchase power from these plants or not

• Energy charges : Paid corresponding to the number of units of power purchased

from that particular plant

• Discoms can replace costlier long term power by procurement from IEX, if,
• Energy charge of power plant is greater than IEX rates
• During night hours prices at IEX are further low and savings can be enhanced
• Discoms can replace ISGS first, keeping import constraint in consideration
• Discoms can continue paying fixed charge to Long Term PPAs and substitute

where energy charge is higher than IEX price

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PPA 1 I 3.70 PPA 2 I 4.06 Long Term Contracts Bilateral Contracts Exchange Capacity Tied up by Discom IEX Price I 2.45 Merit Order Baseline PPA 3 I 3.00 PPA 4 I 1.99 PPA 5 I 2.00 PPA I Variable Cost Must Run Plants

(includes all hydro, nuclear or

• ther ‘take or pay’ type

contractual plants)

Contract 1 I 4.70 Contract 2 I 3.50 Contract 3 I 2.10

Merit order dispatch schedule to be prepared based on Variable cost and considering Exchange Prices

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PPA 1 I 3.70 PPA 2 I 4.06 IEX Price I 2.45 PPA 3 I 3.00 PPA 4 I 1.99 PPA 5 I 2.00 Must Run Plants

(includes all hydro, nuclear or

• ther ‘take or pay’ type

contractual plants)

Contract 1 I 4.70 Contract 2 I 3.50 Contract 3 I 2.10 Increasing Variable Cost To be dispatched in this Order based on Energy Demand of the Discom Merit Order Baseline

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SMART Procurement

Gen 1 : 100 Gen 2 :80 Gen 3: 120 Avl Gen in MW Variable cost Rs 1/unit Rs 3/unit Rs 4/unit

Possible Backdown /Surrender (MW)

20 5 25

Replacement cost/ Exchange Bid

Rs 0.5/unit Rs 2.5 /unit Rs 3.5/unit

Exchange Price Rs 2.1/unit

  5MW 25 MW

Rs 2.6/unit

  25MW

Optimization /Replacement Bid

Smart Buy 18

SMART Procurement

• Assess Generation availability and Demand Forecast for next day (15 min block)
• Generation data for Long Term (LT) I

Medium Term (MT) I Short Term (ST)

• Calculate Surplus and Shortage to prepare “Regular Bid”
• Prepare schedule with maximum back down possible for LT & MT
• For every plant identify maximum back down possible considering all constraints
• Technical I Must Run status I Contractual I Transmission ( Intra / Inter-state)
• Give technical minimum schedule to these plants and identify “Replacement Bid” quantum
• Submit Bid at Exchange (1000 Hrs-1200 hrs)
• Regular Bid: For Regular Shortage/Surplus depending on the demand and Generation cost
• Replacement Bid: Price sensitive bids ( based on Variable cost) for every plant
• Two Bid Options
• Single Bid: For every 15 min time block separately. May lead to non uniform back down schedule
• Block Bid: All or none principle for clubbed time blocks. Will ensure uniform back down schedule
• Post IEX result- finalize schedule ( after 1500 Hrs)
• If Replacement bid not selected: Revise the schedule from the plants whose bid is not selected
• If Replacement bid selected: No change and retain the earlier schedule (max possible back down)

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Timeline for Bidding and Backdown

IEX Bidding D - 1

12 PM

10 AM

00 3 PM

DAM Biding period Results declared ISGS Scheduling

3 PM

9 AM

00 One hour before delivery

Declared Capacity Requisition for Scheduling D If Bid Selected No Need for giving Requisition If Bid Not Selected Requisition can be given one hour before Delivery time

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Merit Order

Power Plant Variable Cost (Rs/kWh) IEX Price (Rs/kWh)

KAWAS LF/RF 7.46/4.51 RTC: Rs 2.23/kWh (July’17) GANDHAR LF 4.49 MAUDA (MSTPS-II) 3.00 MAUDA (MSTPS-IV) 2.87 NTPC RSTPS 1&2 2.42 KAWAS NAPM/APM 2.05/1.83 GANDHAR NAPM/APM 2.04/1.77 VSTPS-STG-I 1.51 VSTPS-STG-II 1.42 VSTPS-V 1.42 VSTPS-STG-III 1.41 VSTPS-STG-IV 1.41 SIPAT-II 1.37 SIPAT I 1.33 KSTPS 1.30 Source: www.vidyutmode.in

*Landed price including POC loss and POC charges as below POC Loss: 2.52% & POC Charges : Rs 0.27/kWh

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CASE STUDY: Cost Optimization by Bihar

• Bihar has initiated the process of Cost Optimization
• The costlier power from Barh & Dadri stations is replaced by

the cheaper power from IEX.

• The Energy Charges of these power plants are greater than the

IEX rates.

• Bihar has made a saving of over 11 crores in 21 days

Due to low prices at the Exchange there was further potential to increase savings

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Bihar Savings

Delivery Day Savings (in Rs. Lacs) Further Savings (in Rs. Lacs) Total 6th June'15 19 83 102 7th June'15 55 38 93 8th June'15 51 17 68 9th June'15 31 43 74 10th June'15 37 27 64 11th June'15 60 9 69 12th June'15 46 15 61 13th June'15 75 30 105 14th June'15 12 80 92 15th June'15 18 70 88 16th June'15 31 53 83 17th June'15 181 181 18th June'15 71 20 92 19th June'15 102 102 20th June'15 103 8 111 21st June'15 78 30 108 22nd June'15 29 67 96

TOTAL 997 487 1,274

*A min of 200 MW power purchase is considered in each block with replacement

• f Dadri &

Barh power

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5 10 15

Savings in Rs Crore, FY17

Mar-17 7 Apr-17 15 3.57 3.23 5.71 5.98 33.9 52.9

• Wtd. Avg IEX

Price (Rs/ unit)

• Wtd. avg

Bilateral Price (Rs/ unit) Volumes (MU)

Telangana example: Procurement on exchange in March-April ’17 increased by 45% yoy

Better utilization of exchange has generated significant savings for TL DI SCOM

Note: Savings estimated by assuming that scheduled vol. from exchange would otherwise be procured from bilateral contracts. Exchange prices includes POC Charge of Rs. 0.2134/Unit, POC Loss of 1.62% of clearing price, and Rs 0.02/unit transaction charge; Wtd. Avg Bilateral Price calculated on bids placed on DEEP Platform; April prices based on bids in 1-15 April period Source: Power exchange, DEEP Platform

Total ~Rs. 22 Cr TL PURCHASED HIGHER VOLUMES IN FY17 WITH BETTER SCHEDULING % TOTAL SAVINGS OF ~ RS 22 CR TO TL DISCOMS FROM PURCHASES ON PX IN MARCH-APRIL 2017

Date Total Bid (MU) Total Sched. (MU)

• Sched. %

Apr-17 54.0 52.9 98% Apr-16 54.6 46.5 85% Mar-17 43.8 33.9 77% Mar-16 23.5 13.5 57% Total (Mar-Apr 17) 97.8 86.8 89% Total (Mar-Apr 16) 78.0 59.9 77%

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Some states have not utilized Short Term power sources (e.g. exchange) as well as other States

Note: % bought on IEX is calculated on the total energy availability; Power purchased from IEX is calculated assuming that energy is scheduled from IEX on RTC basis; MH data is based on procurement by MSEDCL Source: IEX data; CEA Reports

2 4 6 8 10% UTTARAKHAND 10.0% J&K 4.7% WEST BENGAL 4.2% DELHI 2.7% ASSAM 2.7% CHANDIGARH 2.6% KERALA 2.0% HP 2.0% AP 1.6% CHHATTISGARH 1.4% PUNJAB 1.2% TELANGANA 0.9% UP 0.8% RAJASTHAN 0.7% MAHARASHTRA 0.5% KARNATAKA 0.5% MP 0.0% HARYANA 0.0% 469 638 672 1,984 234 814 42 174 1,295 462 298 805 6 472 334 733 835 Volume bought on IEX (FY17) (MU) 53 53 14 47 9 50 2 9 13 23 61 106 66 49 67 24 139 31 Total Energy availability (BU) 54 73 77 226 27 93 5 20 148 53 34 92 1 54 38 84 95 Power Purchased from IEX (MW) Share of energy bought on exchange, FY1 7 ( % )

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Smart Procurement : Saving Potential

• Rs. 3200 crore from

Smart Procurement

State

DISCOM losses (in INR cr, FY17E) Smart Procurem ent savings (in INR cr, FY17) Average power to be bought (MW) Uttar P

5012 800 1350

Tamil Nadu

2224 490 660

Punjab

1681 190 400

Haryana

2911 270 400

Andhra P.

1032 170 350

Telangana

4380 150 300

Maharashtr

2639 110 390

Rajasthan

2195 80 190

Bihar

2275 60 125

MP

2278 20 70

Other states**

• 1955

820 1450

Total

25000

3200

5700 26

Key factors considered for Smart Power Procurement

• Demand Forecast - Forecast on 15 min time block basis
• Generation Data
• Plant wise DC /Entitlement of various ISGS and SGS on Day ahead basis
• Variable cost of all generators (ISGS,SGS, Bilateral etc)
• Applicable losses and charges Import/Export (banking etc)
• Generator outage period
• Optimization potential assessment
• Must run plants
• Back down potential in each plant considering
• Technical minimum
• Contractual minimum
• Network constraints
• Ramp-up/Ramp down

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2. Smart Contracting

i.

Discoms should tie-up PPA only to manage their base demand

ii.

Many Discoms have tied PPAs to meet their peak demand as well. The Discoms have to pay the capacity charge for this quantum even in the off peak time.

iii.

So for optimum utilisation, Long Term PPA should be

• nly for base demand and remaining energy (for peak

and variations in forecast) should be bought through

• ther available market options.

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Monthly Demand Curve for Delhi

Monthly Peak -Source : CEA 4,176 3,849 3,618 4,799 6,308 6,261 6,342 5,707 5,305 5,442 3,510 3,857 1000 2000 3000 4000 5000 6000 7000 Jan'16 Feb'16 Mar'16 Apr'16 May'16 Jun'16 Jul'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Demand (MW)

Month wise Delhi Demand (MW)

Base Demand

29

Monthly Demand Curve for Punjab

Monthly Peak -Source : CEA 6,283 7,997 10,997 11,408 11,204 10,543 8,408 5,548 6,266 5,954 6,475 6,536 2000 4000 6000 8000 10000 12000 April'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 Mar'17 Demand (MW)

Month wise Punjab Demand (MW)

Base Demand 8500 MW 11,500 MW 5500 MW

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6642 6561 6815 6556 6668 7463 7780 8912 9539 9671 9215 7860 2000 4000 6000 8000 10000 12000 Nov'16 Dec'16 Jan'17 Feb'17 Mar'17 Apr'17 May'17 Jun'17 Jul'17 Aug'17 Sep'17 Oct'17

Demand (MW)

Base Demand

Monthly Demand Curve for Haryana

Monthly Peak -Source : CEA 31

Surpluses/Deficits - Balance physical supply and demand Meeting Shortages/Surplus through Short Term Market Maximizing efficiency –Ideal Scenario (Monthly)

1000 2000 3000 4000 5000 6000 7000 1 2 3 4 5 6 7 8 9 10 11 12 Base (MW) Short Term (MW) Load (MW)

PPA (Base Load Contract)

Short Term/Exchange for peak load

Month

Surpluses/Deficits - Balance physical supply and demand Meeting Shortages/Surplus through STM Maximizing efficiency –Ideal Scenario (Hourly)

500 1000 1500 2000 2500 3000 3500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Base (MW) Short Term (MW) Load (MW)

PPA (Base Load Contract)

Short Term/Exchange for peak load

Smart Contracting- Ideal mix LT

Methodology 2 -Long term PPA for 80% of total energy demand

• Draw load curve for a state (indicating demand met in MW for each hour of the year),
• Estimate the demand met in MW that corresponds to meeting 80% of total energy demand
• ver the year
• Estimate total capacity required to meet baseload demand by applying an average Plant Load

Factor (PLF) to the baseload demand met (in MW). Commercial decision-making

34

Key considerations – for long-term

• Demand projections for next few years (say 3)
• Extent of Renewable growth
• Solar Rooftop potential
• Hydro potential in the State

35

Procurement Strategy for Renewable Energy

• Purchase of bundled green power to be benchmarked with market

determined prices of power & REC

• Discom can purchase Power @ 2.41 (IEX Avg. Price for FY17)

REC @ 1.00 3.41

• Deficit state should procure renewable power only if the power is available at

Price less than Rs 3.41/kWh.

• Flexibility in procurement as Discom can purchase power when they actually

need. Flexible Purchase at most competitive price

36

Power Exchange across Globe: Enormous potential to grow for India compared to international benchmarks

INDIA TRADES ~3% OF ITS OVERALL CONSUMPTION ON EXCHANGE MARKETS COMPARED TO 15-91% GLOBALLY GLOBAL BENCHMARKS ON PENETRATION OF ST MARKETS

20 40 60 80 100

Exchange traded ( % total consumption)

India France UK Netherlands Germany Italy Nordic

2004 05 06 07 08 09 10 11 12 13 14 15

Indian markets still at a nascent stage and high potential for growth for the Indian Power Exchanges

VOLUME IN BU (Billion Units) 37

IEX SMART POWER PROCUREMENT TOOL UNDER PILOT TESTING PHASE

38

Generation Master

39

Replacement Potential Assessment

40

Bid Preparation

41

Suggestions for development of competitive power market Power Purchase cost optimisation by Discoms

• Follow merit order dispatch
• Discom to ensure that the principle of economic dispatch/ merit order dispatch

(National Tariff Policy), is followed while preparing day-ahead power procurement

• plan. The merit order should include energy charge of all available power plants,

power exchange prices and prices of other short term arrangements

Policy push for promoting short term market

• Prices discovered on Short term market, particularly Exchanges is very competitive,

therefore policy initiatives for short-term transactions be encouraged.

• Allow coal linkages for merchant power plants also.

Long term PPAs by Discoms should be limited to 10-12 years

• Discoms in past contracted long term power on the basis of peak demand, as a result,

many of the states landed up having surplus capacity during 6-7 months in a year, paying capacity charge without utilizing the power.

• PPAs should not be more than 10-12 years to give comfort to the bankers.
• PPAs which expire after 25 year period should not be renewed and be allowed to sell

power in market on competitive basis

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