Cross Border Electricity Trade

Transcription

1 Cross Border Electricity Trade Afghanistan Pakistan Nepal Bhutan India First meeting of core team on South Asian Regional Power Exchange (SARPEX) Bangladesh 7 th - 9 th February, 2017 New Delhi, India Presented by: Dr. Puneet Chitkara Yasir Altaf Maldives... Sri Lanka Combined meeting of TF-2 and TF-3, Dhaka 1

2 Outline Evolution of CBET and Current Trades Recent Guidelines on Cross Border Trading by MoP, India Key Objectives & Institutional Framework Tariff Determination Transactions through Power Exchange Transmission System Development & Operation Limitations of Prevailing Trades Need for Power Exchanges Power Procurement Process Optimization of Day Ahead, Short, Medium and Long Term Markets Why Power Exchanges - Benefits of a Day Ahead Market 2

3 EVOLUTION OF CROSS BORDER TRADES AND CURRENT TRADES

4 Evolution and Existing Power Trading in BBIN Country Bilateral Contracts Type Bhutan India India Bangladesh India Nepal Contract with PTC for Chukka, Kurichhu Hydro Projects Contract with PTC for Tala Hydro Project Contract with TPTCL for Dagachhu Hydro Project Long-term contract with NVVNL for 250 MW Medium-term contract with PTC for 250 MW Bilateral 100 MW trade from Tripura to Bangladesh Bilateral contracts / Treaties to the tune of 237 MW Past contracts with PTC ( ) during December-April months for ~20-30 MW G to G G to G Commercial G to G Commercial G to G G to G Commercial Imports mainly in the Winter (Nov to Mar) Exports majorly in Monsoon (May to Oct) Imports on the roundthe-year basis Commercial Mechanisms of Price Discovery in Power Trading is well established now in all the 3 countries G to G: Government to Government 4

5 RECENT INTIATIVES GUIDELINES FOR CROSS BORDER TRADING BY MOP, INDIA

6 Key Policy developments in Cross Border Trading Inter- Governmental Agreement between Bhutan and India on development of JV Hydropower Projects SAARC Inter- Governmental Framework Agreement (IGFA) on Energy Cooperation Ministry of Power, India Guidelines on Cross Border Electricity Trade Apr, 2014 Sep, 2014 Nov, 2014 Oct, 2015 Nov, 2016 Power Trade Agreement between India and Nepal Sub-Regional Cooperation between Bangladesh, Bhutan, India and Nepal (BBIN) 6

7 Recent Guidelines on Cross Border Trading by Ministry of Power KEY OBJECTIVES a) Facilitate cross border trade; b) Promote transparency, consistency and predictability in regulations; c) Optimal utilization of available resources in the region; d) Reliable grid operation & transmission across borders; e) Dynamic and robust infrastructure for cross border transactions Designated Agency (CEA) Coordination with neighbors - approvals & procedures for Trading; planning tx. lines, grid security & operations INSTITUTIONAL FRAMEWORK MOP, India Guidelines CERC Regulatory Framework for cross border trading with neighboring countries to be inline with MoP guidelines 7

8 Key Provisions for Tariff Setting of Power Trades Import of Electricity by India G to G negotiations and adopted by Regulatory Commissions Competitive bidding and adopted by Regulatory Commission Hydro projects, exempted from Competitive bidding Export of Electricity by India Mutually agreed or Competitive bidding 8

9 Trading through the Power Exchanges Only the following products are permitted Term Ahead Contracts Intra Day Contracts / Contingency Contracts Subject to Approval from the Designated Authority traded volumes to be regulated and reviewed from time-to-time by the Designated Authority Cross border trade to be extended to other categories of contracts based on review by MoP and CERC Primary or the core Product of Power Exchanges i.e. the Day Ahead Market (DAM) Spot is still not in the list of products to be offered through Exchanges 9

10 Provisions on Transmission System, Scheduling and Accounting Planning for interconnections between two countries based on the need for foreseeable future trading potential; Planning agencies of the countries involved to obtain the approval of the respective Governments Indian Plants supplying exclusively to neighboring countries allowed to build independent transmission system for connecting to the neighboring transmission system Interconnections to be monitored and controlled by the respective system operators of the two countries Priority for Transmission Access by CTU as per the CERC regulation on Cross Border Trade of Electricity Transmission charges, scheduling, accounting, deviation settlement involving Indian Grid and any other related operational mechanism and matters involving inter connected grids of electricity as per applicable CERC Regulations. Cross border trade to be undertaken in a manner that it does not jeopardize grid security at any point 10

11 Provisions on Dispute Settlement Disputes within Indian territory to be settled as per the provisions of Electricity Act, 2003 Disputes involving entities of separate countries may be settled through Singapore International Arbitration Centre (SIAC) or as may be mutually agreed by the participating entities 11

12 WHY POWER EXCHANGES NEED FOR POWER EXCHANGES

13 Volume Optimal Management of daily Demand Supply Position Forecasted demand Day Ahead Buy Sell Hour Ahead/ IDT1 Buy Sell Intra Day demand Real-time demand Ancillary Service Bilateral (peak load) contract Bilateral (Base load) contract The DAM spot with 15- minute dispatch is inherently more compatible than bilateral for closer to the real time needs for balancing the demand supply gaps Optimal management of daily / seasonal variations in demand or supply - buy/sell the surplus / deficits Hours 13

14 893 1,915 8,795 11,950 14,049 22,386 23,393 35,478 36,238 36,540 36,924 36,975 Rs/kWh Rs Crores Challenges faced utilities in optimizing their Power Procurement Costs through bilateral contracts only Short Term Medium Term Long Term Sub optimal level bilateral contracts have led to higher procurement costs for many DISCOMS in India Non-optimal long-term PPA contracting is leading to higher fixed charges & adversely impacting the consumer tariffs in the medium term Rapid ingress of RE needs a special focus on flexibility & reserves in the capacity expansion planning of DISCOMS PSPCL procured 2,769 MUs above the average exchange price of Rs , ,000 80% 70% 72% PSPCL MSEDCL 60% 50% 40% 30% Coal PLF in TN dropped over 20% from 2011 to % PSPCL Tariff Order FY17 PSPCL & MSEDCL Tariff Order CEA 14

15 Need and Evolution of Power Exchanges in India Long & Medium Term Market Short Term Market Power Exchange Long term power markets do not meet the full requirements of the market participants: Projecting hourly consumption over long term without forecasting errors is difficult Long term contracts for peak load requirement may be economically inefficient Similarly, Short-term Markets have the following limitations: Don t permit correction of positions taken by players in long and short term market closer to real time Non-standard and firm nature of contracts Arrangement of separate transmission access explicit transmission allocation / auction Insufficient price signals for investment growth in requisite generation type Power Exchanges provide a neutral, fair and an efficient platform to mitigate some of these challenges Balancing the buy and sell position near to real time Standardized contracts Counterparty risk is taken care of Competitive and widely acceptable future price signals Signals for Generation and Transmission addition 15

16 Benefits of a DAM through a Power Exchange Trading parties specify the contractual terms Negotiating & customization of contracts may take weeks, months to years Assessing the creditworthiness of Counterparty involves risk & costs Bilateral Contracts DAM on Power Exchanges Standardized contract structures Centralized trading with easier & faster access to operate closer to real time Low transaction costs, safe counterparty with clearing and settlement service Not suitable for closer to real time operations More suitable for closer to real time operations While Bilateral PPAs provide certainty to buyers and seller, Power Exchanges allow countries to manage the daily variations in load requirements on a 15-minute basis 16

17 SARPEX would enable closer to real-time balancing and Social Welfare Maximization A cross border exchange will provide a fair, neutral and robust price discovery platform and create an orderly marketplace for all the buyers and sellers in BBIN Market-determined prices - Price transparency, competition and efficient price signals Greater flexibility since trades are on a short-term requirements and production capability basis better suits the resource type of the countries Allows for absolving the counterparty risk Enhanced grid stability through real-time balancing and better coordination between all operating markets and dispatch schedules Economic dispatch Apart from the other benefits of Exchange, it will not only supplement the existing bilateral trade in BBIN but also encourage more choice and investments in the sector 17

18 QUESTIONS AND ANSWERS