The Power Ministry on Wednesday said it has finalised the revised structure of day-ahead national level merit order dispatch mechanism, a move that will aid in optimising electricity generation costs as well as help States meet their power demand in a cost-effective manner.

As per the revised mechanism, the merit order for the cheapest generating resources across the country to meet the system demand will be finalised a day in advance as against 1.5 hours in the existing system, the Ministry said in a statement.

“This will result in better planning for generating units and cost optimisation. Moreover, the revised mechanism will also enlarge the scope of the present mechanism by including all the regional entity thermal power plants and subsequently, all the intra-State thermal generators. In the existing system, only the NTPC thermal stations were part of the merit order dispatch,” it added.

Load forecasting

Electricity is generally purchased by a discom on a day to day basis according to the assessed demand of the State or a region. To assess this daily demand, load forecasting is done on a day-ahead basis (one day before) after considering factors such as weather, temperature, crop season and industrial load.

Merit order dispatch pertains to the sequence in which power plants are selected to deliver power with the objective to optimise power supply thereby reducing costs. It is based on the lowest marginal costs incurred by a power plant to produce a 1 megawatt hour (MWh).

The gains out of the proposed day-ahead national level merit order dispatch mechanism would be shared between Gencos and their consumers. This will result in increased annual savings for the consumers. It will also help States in maintaining resource adequacy in a cost effective manner with less carbon footprints, Power Ministry said.

The mechanism will be implemented by the Central Electricity Regulatory Commission (CERC) through necessary regulatory processes and it will be operated by Grid India at the national level, it added.

Cost optimisation

The existing mechanism of merit order dispatch at real time was made operational in April 2019. This optimised the total variable cost of generation pan-India, while meeting technical and grid security constraints.

The existing mechanism resulted in reduction of variable cost on pan-India basis to the tune of ₹2,300 crore and these benefits were being shared with generators and their beneficiaries ultimately reducing the cost of electricity to consumers.