Optimising transmission capacity allocation among market participants

Rajesh K Mediratta, Director (Business Development), Indian Energy Exchange details the means of optimising transmission capacity allocation and its benefits
Past decade had been stupendous for power sector in India. The regulatory reforms not only brought in investment but also boosted competition in the sector. Generation segment has outshined with these reforms. Today, we have almost doubled the generation capacity to 234 GW in a decade. Similar efforts are being made to improve efficiency of transmission and distribution segment.
Open access refined the mechanism of connectivity to power by segmenting the market into long-, medium- and short-term open access consumers. According to Monthly Market Monitoring Reports published by CERC, power exchanges constitute about 3 per cent of the total power transactions in the country during Apr – Dec 2013. Other modes of power transaction include long-term agreements (88 per cent), bilateral transactions – direct (2 per cent) and traders -4 per cent and unscheduled interchanges (2 per cent). A short-term power market owes huge potential to grow. At Indian Energy Exchange (IEX), the transacted volumes are growing with the CAGR of 56 per cent in span of 5 years with monthly average volume transacted in FY14 (up to February) is about 2,422 MU.
Even though short-term power markets have grown and matured in a very short span, same is not reflected in the transmission planning and capacity allocation methodology. Transmission network capacity is created for long-term PPAs with some natural inherent margins. Competition which is mainstay of Electricity Act is possible only when the buyer or seller has choice in shorter timeframes. But if we do not build flexibilities in transmission capacities for these shorter timeframes, transactions and therefore competition is thwarted.
Moreover, in transmission capacity reservation methodology, long-term open access consumers have the highest priority in the transmission capacity allocation. They are followed by medium-term and short-term open access customers respectively. Within short-term open access customers, the allocation priority is preceded by advanced short-term open access customers, followed by bilateral and then residual capacity is left for collective transactions. The lowest priority for allocation is for contingency short-term open access consumers. However, CAGR of volumes traded on power exchanges is about 49 per cent whereas in bilateral it is about 15 per cent. This shows lagging sync between the available transmission network and traded volumes for different segments of market. Fastest growing segment is hit most for the transport of the commodity i.e. electricity.
In order to optimise transmission capacity allocation, it is essential that common platform is provided to all the participants in short-term market. Advance Transmission Corridor Reservation (ATC) reservation can be introduced for consumers in both bilateral and collective transactions. In a scenario where requested transmission capacity exceeds available transmission capacity, e-bidding can be conducted. This would provide a common and transparent opportunity for short-term market participants to reserve their required transmission capacity in advance. The allocated transmission capacity will be on ‘use or lose’ basis.
Currently participants in collective transactions can only bid for energy in the market and they get scarce capacity if their energy bids are good enough in competition with others. In collective transactions, buyer or seller should be allowed to book corridor in advance. Once booked, they will be considered on the uncongested side of the corridor for purpose of corridor to the extent of corridor booked and will pay the Average Clearing Price (ACP) of area of the other side of corridor. Remaining buyers or sellers with no prior booking will be considered in Day Ahead Market (DAM) as at present. This way, advance booking will lead to convergence of electricity flow from surplus to deficit regions and would narrow the price gap between these regions.
With introduction of competition in transmission capacity allocation, the consumer welfare would increase. It can also result in balancing out transmission charges. Consumers and Discoms in SR can take the advantage of the capacity as well as the competitive price on the exchange. This is a win-win proposal for market participants and is revenue neutral to transmission licensees.
Authored by:Rajesh K Mediratta, Director (Business Development), Indian Energy Exchange

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