Introduction to Power Exchanges

Transcription

1 For Public Use Introduction to Power Exchanges Presented by: Mr. S.K. Ray on behalf of IEX

2 In this presentation Introduction to Indian Power Markets Power Exchange functioning and Market Snapshot International Experience for Cross Border Trade Cross Border trade through Exchange: SAARC Region

3 India Power Sector Key Market Segments Long Term Up to 25 years OTC: Intraday to 1 year 11,07,820 MU Short Term Exchanges: Intraday 11 days Real Time 992,590 MU 59,473 MU 35,010 MU 20,754 MU 89.6% 5.4% 3.2% 1.9% Long-term Power Purchase Agreements (PPA) Over the Counter Bilateral Trade Agreements (OTC) Effected by Licensed traders Exchanges (Only up to 11 days) Day Ahead Contingency Daily Weekly Day Ahead Market Unscheduled Interchange Short Term Power market is at ~10%, Power Exchange volume in the segment have been growing significantly Source: CERC MMC Report All values for FY16

4 About IEX Inception in June 2008 Established under the Regulatory oversight of Central Electricity Regulatory Commission (CERC) Transparent market platform that facilitates delivery based trading Electronic, on-line bidding Standardised Contracts Flexible trading with separate price discovery for 96 time-blocks of 15 min in a day for Day-Ahead Market No Financial products such as Derivatives and Forward contracts Worldwide, Power Exchanges (40+) trade power are most common platform to

5 Company Snapshot Average daily trade: 4500 MW (>100 MUs) High Participation: Industries I 50+ Discoms (all) I 350+ Generators Transparency Liquidity Competition

6 IEX Market Segments Delivery-based Contracts Day-Ahead Market since June,08 Delivery for next day Price discovery: Closed, Double-sided Auction Intraday Market & Day- Ahead Contingency Round the clock since Jul 15 Term-Ahead Contracts since Sep,09 Renewable Energy Certificates since Feb,11 Energy Saving Certificates Intraday: For Delivery within the same day Day Ahead Contingency: Another window for next day Gate closure : 4 hours For delivery up to 11 days Daily Contracts, Weekly Contracts Green Attributes as Certificates Sellers : RE generators not under feed in tariffs Buyers: Obligated entities; 1MWh equivalent to 1 REC Expected soon In India, all electricity contracts at the Exchange are for physical delivery No derivatives or contracts with delivery over 11 days available

7 Features of Day Ahead Market Physical delivery based market A closed double-sided anonymous auction for each 15-min time block for the following day Highly flexible: Bid for any single/combination of time block Intersection of aggregated sale and purchase curves defines Market Clearing Price (MCP) 12 Bid area defined for congestion ATC across bid areas determined by NLDC /RLDCs Market splitting determines Area Clearing Price (ACP) specific to an area (available at Delivery/ Settlement /All Open Access Charges thru IEX

8 DAM trading process Bidding Matching Review corridor and funds availability Result Confirmation Scheduling 10:00 am to 12:00 pm 12:00 pm to 1:00 pm 1:00 pm to 2:00 pm 3:00 pm 5:30 pm 6:00 pm Bids for 15- min each or block bids can be placed MCP & MCV calculated Corridor availability and funds verified Final ACV and ACP calculated. Market split if congestion Collective transaction confirmation by NLDC Final Schedule sent to RLDC for incorporation

9 Matching: Model Price Calculation algorithm (Example for a sample 15-min- single bids) Price Tick Portfolio A Portfolio B Portfolio C Portfolio D Portfolio E Portfolio F Total Buy, MW Total Sell, MW Net Transaction, MW MCP: Rs Demand (Buy) Supply (Sell) MCV: 120 MW

10 Volume (BU) Price (Rs./kWh) Price and Volume: Bilateral vs. IEX DAM IEX Volume Trader Volume IEX Price Bilateral Price FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 Prices at the Exchange always remained lower than Bilateral Contracts Source: CERC MMC Reports 1-1

11 Avg Hourly Volume (MW) High Liquidity in Volume at IEX (Avg. Hourly Volume in MW) 1, *Data upto Dec 31, ,334 1, ,919 2,371 1,347 2,842 2,539 1,571 4,456 3,956 2,554 4,737 5,741 3,302 4,942 4,689 3,212 4,907 6,434 3,878 5,450 8,810 4,592 MCP (Rs/kWh) Purchase Bid (MW) Sell Bid (MW) Cleared Volume (MW) IEX Wt. Avg Price (Rs/kWh) 10, , , , , , ,000 3,000 2, , * 0.00

12 15 min wise Price trend of a typical day in December 16 (22 nd Dec 16) Daily Average Clearing Price for December

13 Daily Average Market Clearing Price for the month Dec Daily Average Clearing Price for December

14 Data as on 31 Dec 2016 Monthly Price Trend FY FY FY Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

15 IEX prices on Vidyut Pravah

16 HHI Index for Market Concentration (BUYERS) HHI Index Inference Below 0.01 Highly competitive market Below 0.15 Un-concentrated market Between 0.15 to 0.25 Market with moderate concentration Above 0.25 Market with high concentration

17 HHI Index for Market Concentration (SELLERS) HHI Index below 0.01 below 0.15 between 0.15 to 0.25 above 0.25 Inference Highly competitive market Un-concentrated market Market with moderate concentration Market with high concentration

18 Avg Price (Rs/kWh) Region-Wise Price Trend South (S1) North (N2) RoI (W2)

19 TAM Market Segments Open Auction Continuous Continuous Continuous

20 Contract Characteristics TERM AHEAD MARKET Contract Characteristic Day Ahead Market Intraday Contracts Day Ahead Contingency Daily Contracts Weekly Contracts Delivery Next day Hrs same day For next day From 4 th day to next 7 days For next week Auction Type Closed Auction Continuous trading Continuous trading Continuous trading Open Auction Contracts 15 min Hourly Hourly Block of Hours (Fixed) Block of Hours (Fixed) Trade Availability All Days All days All Days; All Days; Wed & Thurs; Financial Settlement Pay-In- D-1; Pay Out D+1 Pay in: T+1 Pay out: T+1 Pay in: T+1 Pay out: T+2 Pay-In- D-1; Pay Out D+1 Pay-In- D-1; Pay Out D+1 T = Trade D = Delivery

21 Price and Volume trend in TAM

22 International Experience

23 Enhancing efficiency through PXs: Market Coupling in EU Countries Market Coupling is linking separate day-ahead markets using cross-border transmission capacities. It is conceptually similar to market-splitting being used internally for Day-ahead markets in India. Features are: Conducted as an implicit auction : transmission capacity allocation is integrated with the energy market ( explicit auctions sell capacity separately) Price differences between each spot market are minimised, with convergence at times when there is sufficient capacity Capacity usage is optimized Perfect Market arbitrage Integrated market Since 2015: North-West & South-West Europe coupled 19 Countries 75 % of Europe s energy 3000 BUs Consumption PA

24 European Market Coupling Benefits

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28 Key Developments in the Integration of European Market

29 Intraday Target Model for EU

30 Why Exchange for cross border trade Competitive & Vibrant Markets Transparent and neutral platform Price discovery trusted and reliable Double-sided bidding best price discovery tool Implicit Auction: Transmission management

31 Cross Border trade through Indian Power Exchange

32 Cross Border Trade through Exchange Guidelines issued by Ministry of Power: 5 th December 2016, allows cross border trade through power exchanges under the Term Ahead market contracts: Intraday, Day-Ahead Contingency, Daily and Weekly contracts 7.0 TRADE THROUGH INDIAN POWER EXCHANGES: 7.1 Any Participating entity, with approval from the Designated Authority under para 5.2.1, after complying with the relevant regulations of CERC, shall be eligible for cross border trade of electricity through Indian Power Exchanges under the categories of Term Ahead Contracts, Intra Day Contracts/ Contingency Contracts as defined in the Power Market Regulations of CERC. Provided that other entities shall be eligible to participate in the Indian Power Exchanges through the eligible licensees under the aforesaid Regulations of CERC. 7.2 Further, the quantum of electricity that can be traded under cross border trade for electricity in Indian Power Exchanges shall be prescribed from time to time by the Designated Authority. 7.3 Cross border trade of electricity can be extended to other categories of contracts based on review by Ministry of Power in consultation with CERC. Two key functions as prescribed by MoP for CEA as designated authority for the CBT through Power Exchange: Accord of approval for Participating Entity(ies) for cross border trade between India and the neighboring country and/or through Indian Power Exchanges. Notifying the quantum of electricity from time to time that can be traded under Cross Border Trade for Electricity through Indian Power Exchanges The Designated Authority will frame its own rules for Conduct of Business (CBR) for facilitating the process of approval and laying down the procedure for Cross Border Trade of Electricity between India and neighbouring countries and other related matters.

33 Next steps to operationalize Cross Border Trade through Exchange CERC to notify Regulations for Cross Border Trade CEA to formulate CBR (Conduct of Business Rules) IEX to file for approval for changes in Business Rules or TAM contract specs, if required, in line with CERC regulations

34 Proposed Operational Mechanism 1. A Designated Trading Licensee to facilitate transaction/ Direct participation by Cross border entity (CBPE) 2. If trading through Indian Trading Licensee, TL to Register Cross-border Nodal entity as client Client shall be signatory of Member-Client Agreement Bidding on behalf of Cross-border agency Financial Settlement 3. Delivery Point: Delivery point for all cross border transactions to be the Indian Periphery, the point of connection with the Indian Grid. 4. NLDC to provide interconnector-specific cross border capacity

35 Proposed Operational Mechanism 5. Financial Settlement through Indian Trading Licensee (TL)/ directly by CBPE As per Exchange Timelines Trading Licensee to settle with CBPE as per their agreement 6. Transmission Curtailment In accordance with Open Access Regulations as done for the current participants 7. Deviation settlement through Indian Trading Licensee Deviation settlement as per Indian Laws or as agreed for bilateral contracts 8. Others Trading Licensee to abide by the rules, bye-laws of the Exchange. All charges relating to Exchange payable by CBTE/TL Indian Currency for bidding and financial settlement at Exchange Indian Standard Time to be followed for 15-min block wise transactions.

36 Thank You Follow Use IEX Mobile Application to track prices Register for Daily SMS alerts Register for IEX Monthly Bulletin

37 Evolution of Internal Energy Market ( IEM ) in Europe Goal Electricity should flow between member states as easily as it currently flows within them Obstacle : Historically, markets were vertically integrated on a (+/-) national basis, whereas cross-border interconnectors have been less developed Congestion on cross border interconnections Building new transport capacity is costly and extremely slow Long term structural solution : increase of capacity or new interconnectors incentivize appropriate locations for new generation units On short term, with low cost impact : Allocate/Use scarce transmission capacity via market-based mechanisms

38 Evolution of liberalization in EU Internal Electricity Market 1st package Internal Electricity Market (1996) Freedom to choose supplier. Consumer >100 GWh/Y eligible as from Free Generation Transmission : natural monopoly ( Chinese wall ) Choice between NTPA and RTPA 2nd package (2003) State responsibility to ensure sufficient generation capacity Legal unbundling between TSO & DSO Mandatory RTPA Mandatory regulator Full market opening: latest Market based capacity allocation 3rd package (2009) Ownership unbundling (OU) or Independent SO (ISO+) or Independent Trans Oper(ITO) TSOs enhanced regional cooperation ENTSO - Energy Networks of TSOs Harmonisation & enhanced regulatory competences ACER ( European agency regulators) EU network codes

39 Capacity utilisation in Explicit Auction Markets

40 Capacity utilisation in case of implicit auction

41 Evolution of Market Coupling in EU 2006 Trilateral market Coupling 2010 CWE Pentalateral Market Coupling 2010 InterimTight Volume Coupling The evolution of the concept started with Nordpool and adopted in Central Europe through TLC by France, Belgium and Netherland BritNed coupling 2014 North West Europe (NWE) M.C. Based on PCR infrastructure Other established regions: Italy/Slovenia project to integrate with PCR Trilateral Cz-Slo-Hun 2014 Iberia joins NWE Success of TLC encouraged EU to make regulations in 2009 for larger coupling of regions now also known as PCR(Price Coupling of Regions) and MRC(Multi Region Coupling).

42 MoP Guidelines (Para 5.2.1) Considering that electricity trade shall be involving issues of strategic, national and economic importance, participating entities (Participating Entity(ies)) complying with following conditions shall be eligible to participate in cross border trade of electricity after obtaining one-time approval from the Designated Authority: a) Import of electricity by Indian entities from Generation projects located outside India and owned or funded by Government of India or by Indian Public Sector Units or by private companies with 51% or more Indian entity (entities) ownership; b) Import of electricity by Indian entities from projects having 100% equity by Indian entity and/ or the Government / Government owned or controlled company(ies) of neighbouring country. c) Import of electricity by Indian entities from licenced traders of neighbouring countries having more than 51% Indian entity(ies) ownership, from the sources as indicated in para (a) and 5.2.1(b) above. d) Export of electricity by distribution licensees / Public Sector Undertakings (PSUs), if surplus capacity is available and certified by the concerned distribution licensee or the PSU as the case may be.