Commodities

Energy markets more remunerative for renewable power

M Ramesh Chennai | Updated on January 05, 2021

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In December, IEX recorded its highest-ever trading volume of 7.26 billion units, up 52 per cent year-on-year.

Long term wind and solar prices are going down all the time – solar prices dipped to a wonder ₹1.99 a kWhr last month – but there is another market where the generators get a much higher price: the energy markets. If you are a wind or solar generator you could get even ₹4 a kWhr on a good day.

In December, 90 million units of electricity were sold in what is called the G-TAM (or green term-ahead market) of India’s bigger energy exchange, the IEX. In G-TAM, a buyer or seller of electricity can offer to buy or sell bids for any day in the following 11 days. (That is now, but more extended period contracts will be allowed after a legal glitch is removed.)

IEX introduced G-TAM in August 2020; 549 million wind and solar electricity units have been sold and bought up till December. But here is the meat: December prices ranged between ₹3.60 and ₹4 a kWhr.

 

In future energy companies could be putting up merchant power plants, where the electricity could be sold on daily or short-term contracts instead of long-term power purchase agreements. Asked about this possibility, Rohit Bajaj, who heads Business Development at IEX, said, “that is 100 per cent on the cards.” Though for starters, generators who build wind and solar power plants under a long term PPA would first over-size their capacities, to be able to sell power from the extra capacity through the markets. For example, if a developer wins a project through a tender for, say, 200 MW, he could build a 225 MW plant, aiming to sell power from the additional 25 MW through the exchange at better prices.

Bajaj said that energy companies were waiting for battery prices to come down. Then, they could store the energy and sell it only when the prices are reasonable. That is when many merchant power plants could crop up.

Record high

In December, IEX recorded its highest-ever trading volume. The exchange, which has been in existence for 12 years, saw 7.26 billion units more electricity traded, 52 per cent more than in December 2019, showing an uptrend in electricity demand. “On 30 December when peak demand touched 182.9 GW, IEX electricity markets underpinning the core values such as most competitive prices, transparent as well as flexible power procurement, contributed to a significant 6.9 per cent of the peak demand met,” says a press release issued by IEX today.

 

Kochi-Mangalore pipeline

The 450-km Kochi-Mangalore gas pipeline positively impacts IEX, which floated a subsidiary, Indian Gas Exchange, in June last year. IGX got its formal authorisation to operate in December.

With the pipeline, LNG imported at the Kochi terminal will now flow to the industrial city of Mangalore, which has energy-hungry companies like Mangalore Refineries and Petrochemicals, Mangalore Chemicals and Fertilizers and ONGC Petrochemicals Ltd, and several other small and medium industries.

“Whenever transmission infrastructure improves, consumers, move a part of their purchase from long term to short term,” Bajaj observed. As such, more people would be willing to buy gas, short term, through the IGX.

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Published on January 05, 2021
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