CERC pushes for 100% power sale in spot market Feb 5, 2019

New Delhi: India proposes to move to the global practice of selling entire powergeneration through spot market to lower tariffs, promote efficient plants and withstand periodical aberrations that benefit a few plants. It is also expected to ensure that power plants with low tariffs do not get into ‘stressed assets‘ category in future even without power purchase contracts with states. However, Association of Power Producers director general Ashok Khurana said the operational and settlement issues have to be looked into for implementation. The proposal put forth by sectoral regulator and followed in Europe and many parts of the US is expected to result in savings of crores of rupees to the state-owned electricity distribution companies. An exercise by the Central Electricity Regulatory Commission (CERC) showed that the mechanism could have last year resulted in savings of nearly Rs 6,000 crore to distribution companies of five states. If implemented, pan-India the savings are expected to be higher. CERC has begun consultations on the proposal on market-based economic dispatch of electricity. The mechanism proposes to pool all electricity generated in the country, including from projects which have signed power supply pacts with discoms. The buyers and sellers will place their bids for required quantities and a settlement price will be discovered, as per the normal practice on power exchanges.   Of the pooled capacity, economical power stations will get to sell their produce ensuring their optimum utilisation. The costly plants, which have power purchase agreements (PPAs), get fixed costs from distribution companies, as is the practice even today when discoms backdown from purchasing the contracted amount of electricity.   CERC chairperson P K Pujari said the commission last week issued suo motu order for pilot run of the scheme by letting the grid operator POSOCO pool electricity from all projects for which tariffs are regulated. The pilot run will start from April for six months after the required software upgradation. CERC joint chief SK Chatterjee said the proposed mechanism is a game changer as it seeks to bring about a paradigm shift in the way demand is met and supply dispatched, with the larger objective of reducing overall system costs. This can also address the stressed asset issue to an extent as the cheaper ones out of the lot can get dispatch even without a formal PPA, he said. “The way contracts are structured today, we have some costly generation which is operating and some low cost generation that remains unutilised because discoms operate in silos. If we pool all electricity together, we can break this silo or wall. Then the dispatch will happen based on merit and low-cost electricity will get consumed fully, reducing part of the costly power generation,” he said. Periodic aberrations on power exchanges are also likely to disappear once larger capacity is traded, Pujari said. “Slight increase in demand than supply causes impact on exchanges. Once the share of power grows and competition picks up, impact of such aberrations will not be there,” he said. Aggressive bids by discoms in western and southern region led the prices on India Energy Exchange (IEX) peak to 10-year high of Rs 18 per unit last October. The approach, however, is not without challenges. While adequate transmission capacity is an enabler, it may face resistance from some states and costlier plants. “The concept of market-based economic dispatch is very good. It would provide most competitive price to consumer. However, I have doubts regarding success of its implementation,” said Khurana.

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