Commodities

IEX platform for renewable power soon

M Ramesh Chennai | Updated on December 13, 2019 Published on December 13, 2019

Wind, solar energy firms that sell under unviable terms will be major beneficiaries

The Indian Energy Exchange (IEX), India’s leading energy exchange, is hopeful of being able to introduce a trading platform for wind and solar power, early next fiscal.

When this happens, wind and solar energy companies who put up plants in future, or those who have some surplus capacity not committed under long-term power purchase agreements (PPA) could sell their electricity on the IEX — which is expected to fetch them a better price.

However, it would need the approval of the federal electricity regulator, the Central Electricity Regulatory Commission (CERC), which “is in an advanced stage,” said Rohit Bajaj, Senior Vice President and Head—Business Development, IEX. Bajaj told Business Line that the regulator wanted to collect comments from stakeholders first. Accordingly, “The first and foremost comment was, ‘please bring it in ASAP’,” Bajaj said.

Low tariffs

Wind energy companies are reeling under what it believes to be unviable, low tariffs. These tariffs, determined through competitive bidding processes — where the company that offers to sell power the cheapest gets to sign long-term power purchase agreement — had fallen as low as ₹2.43, before firming up slightly to ₹2.93.

The industry believes that it has to get upwards of ₹3.25 to stay viable, but companies, backed by turbine manufacturers, bid low regardless in order to keep their factories running. Once committed under a PPA, the energy companies have no option but to keep selling power for the agreed period of time, typically 25 years, at those tariffs.

‘REC mechanism’

But future wind projects can keep a part or whole of their capacity outside long-term PPAs. Power from such ‘merchant’ capacity can be traded on the exchange. Today, there is about 4,000 MW of wind capacity under the ‘REC mechanism’. The energy companies (developers) that own these projects sell their power to the State electricity distribution companies (Discoms) for the same prices as the Discoms’ average cost of power purchase.

Because they opt not to sell their green power for higher prices, the developers get ‘renewable energy certificates’ that can be traded in the market. The certificates will be bought by those entities under obligation to purchase either green power, or, failing that, the certificates. As some of the REC projects have completed their PPAs, they can now sell their power on the exchanges.

It is pertinent to note that the IEX had given a somewhat similar proposal to the regulator a few years ago. The CERC had rejected it saying that the “market condition at present is not conducive for the introduction of this product.”

Rajesh Mediratta, Director (Strategy and Regulatory Affairs), told BusinessLine that the IEX had given a different petition this time around. Earlier, the proposal was for the ‘day ahead market’, but now the idea of ‘term ahead market’, or letting renewable energy companies offer electricity for sale after more than a day, has been mooted.

Published on December 13, 2019
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