New Delhi

With India fast turning into a surplus power market, the government is looking at throwing open the short-term electricity market to consumers in neighbouring countries, allowing them access to Indian power exchanges for meeting day-to-day requirements.

Sources privy to the development said the central electricity regulatory commission (CERC) is vetting draft regulations on the cross-border power trading and will soon finalise it, allowing Indian exchanges to trade power in the short-term market overseas. This could begin as early as the next financial year after the new government takes office at the Centre.

The mechanism would give fillip to power exchanges, like India Energy Exchange (IEX), which are also battling subdued demand in the domestic spot market and depressed average tariffs.

Though both demand and tariffs have picked up in recent months, it’s yet to expand the short-term market that has remained stagnant at about 10 per cent of the total electricity generation in the country.

“While the cross-border transactions in the TAM (term ahead market) segment is allowed, the same is not permitted for short-term power purchase through exchanges. The changes by CERC will allow power producers to offer electricity directly to distribution entities in neighbouring countries through Indian power exchanges,” said Satyanarayan Goel, managing director and CEO of IEX.

He, however, added the cross-border transactions would only be successful once the monopoly of state distribution entities is broken and a multi-buyer, multi-seller market is developed. “Only this model will allow for trading of power and efficient price discovery,” Goel said.

Sources said the cross-border trading facility through power exchanges might initially be available for countries like Nepal, Bhutan and Bangladesh.
India has transmission links with them and medium-term transfers are permitted after the government approval. It could be extended to other neighbouring markets like Myanmar and Sri Lanka once necessary infrastructure is created. Though correct estimates are yet to be made, industry sources said there could be demand for 300-400 MW from the cross-border trade in the spot market initially.

IEX is country’s largest power exchange and trades about 5,000 MW per day in the domestic market.

A vibrant power exchange mart with ability to trade in the spot market for consumers in domestic as well as overseas markets would also be good news for power generators as they could be able to tide over the low demand situation in the domestic market to transfer capacities overseas.

Moreover, option sell outside could also allow a fresh lease of life to several stranded power projects, which have put the banking sector under strain. Domestic power traders have already shown interest in striking overseas deals.

Opening of Indian power exchanges to overseas entities will also allow countries like Bhutan, having surplus hydro capacity, to trade on the exchange with Indian consumers. This could help India increase the share of renewable power in its generation mix. The export market for electricity is picking up in India, a fact that was also acknowledged the central electricity authority (CEA), the country’s apex power sector planning body, in a report. According to CEA, India has turned around from a net importer to net exporter of electricity.

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