Revised day-ahead power dispatch mechanism framework finalised

The revised mechanism will save consumers and states by meeting electricity demand cost-effectively with less carbon.

The Ministry of Power in India has announced a revised structure for the Day-Ahead National level Merit Order Despatch Mechanism to reduce the overall cost of electricity generation and to lower electricity prices for consumers. The revised mechanism is expected to increase annual savings for consumers and will help states cost-effectively maintain resource adequacy with less carbon footprint.

Under the new mechanism, the merit order for the cheapest generating resources across the country to meet the system demand would be finalized a day in advance. This is a significant improvement from the existing system, where the merit order is finalized only 1.5 hours in advance. This will help to generate units to plan better and optimize costs. The revised mechanism will also enlarge the scope of the present mechanism by including all regional entity thermal power plants and subsequently all intra-state thermal generators. In the current system, only NTPC thermal stations are part of the merit order despatch.

The existing mechanism of merit order dispatch in real-time was made operational in April 2019. This optimized the total variable cost of generation pan-India while meeting technical and grid security constraints. The existing mechanism resulted in a reduction of variable costs on a pan-India basis to the tune of ₹ 2300 crore, and these benefits were shared with generators and their beneficiaries, ultimately reducing the cost of electricity to consumers.

The gains from the proposed Day-Ahead National Merit Order Dispatch Mechanism would be shared between generating stations and their consumers, resulting in increased annual savings for electricity consumers. The Day-Ahead National Merit Order Dispatch Mechanism will be implemented by CERC through the necessary regulatory process and operated by GRID-INDIA at the national level.

Since 2014, the government has added 184.6 GW of additional generation capacity and 1,78,000 ckt km of transmission lines to connect the whole country into one grid. This has transformed the whole country into one integrated electrical system. The Ministry of Power has been taking several measures to enhance competition in the sector to lower the cost of electricity to consumers.

The revised mechanism is expected to further reduce the cost of electricity generation, benefiting consumers and reducing the carbon footprint of the sector. The government’s efforts to increase competition in the sector and expand generation and transmission capacity will help ensure a reliable and affordable supply of electricity across the country.