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Real-time market for power procurement may impact discoms as industrial users gain: ICRA

Our Bureau Hyderabad | Updated on June 11, 2020 Published on June 11, 2020

The real-time market (RTM) for power trading from June 1 is providing an efficient price discovery in the power trading market.

The RTM power trading enables the distribution utilities and the open access consumers to bid for electricity within one hour of the requirement, against the prevailing day-ahead market.

According to ICRA, this would enable discoms and system operators to lower the cost of grid balancing by reducing dependence on deviation settlement mechanism (DSM) and ancillary services.

Sabyasachi Majumdar, Group Head & Senior Vice-President - Corporate ratings, ICRA Ltd, says, “The introduction of RTM trading would enable efficient price discovery for electricity and support grid balancing activities. This is especially significant in the context of rising share of renewable energy in the electricity generation in India. Considering a 50 paise per unit saving under RTM trading against DSM and assuming a 50 per cent transition in procurement from DSM to RTM in the near to medium term, the annual savings for discoms and open access consumers is estimated to be ₹550 crore. Further, a robust communication and software systems remain crucial for implementation of real time market.”

With the improved tariff competitiveness of wind and solar power, the share of renewable energy in the all-India electricity generation has increased to 10 per cent in FY2020 from 5.6 per cent in FY2016. This coupled with the variable nature of renewable generation adversely affects the grid balancing process.

Frecasting and scheduling

While the gradual implementation of forecasting and scheduling mechanism for wind and solar power projects is expected to ease the grid balancing process, the availability of RTM power trading would provide an enabling mechanism for efficient grid management.

Price on the power exchange market is expected to remain subdued (less than ₹3/unit) in the near term, given the surplus capacity scenario and subdued demand growth expectations for the current year.

The industrial and commercial consumers may increase their power procurement through open access on power exchanges. This in turn may negatively impact the revenues and profitability for discoms, given that such consumer segments cross subsidise the supply to domestic and agriculture consumers of the discoms.

Considering open access charges at the higher end of ₹ 4 per unit and spot power tariff of ₹2.5 per unit, the procurement from open access is likely to be more economical for the industrial and commercial consumers at the prevailing grid tariff rates. This in turn may also lead to an upward pressure on cross subsidy surcharge and additional surcharge imposed by the discoms to discourage such open access

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Published on June 11, 2020
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