POWERGEN India – Indian Utility Week

'Evolving Currents: Navigating the Dynamics of Tomorrow's Electricity

Market'

By

Satyajit Ganguly
MD&CEO, PXIL
6th September 2024

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Index

Sr. No Content Slide No.

1 Evolution of Short-Term Market 3 to 5
2 Contracts on Power Exchange 6 to 9
3 Market Design Framework 10 to 12
4 Market Structure and Ecosystem 13 to 16
5 Systems, Processes and Data 17 to 20
6 Trading, Platforms and Products 21 to 24

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Evolution of Short-Term Market

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 Short Term Markets: Size and Growth
240
14-yr CAGR (till FY 24)
Exchange 22%
200 Trader 4% 27
Direct 10%
26 24
DSM 0.3% 25
160
21 31
46
Volume (BU)

25 23
23
120 39 34
24 17
23 19
21
28
21 17 27
25 19
24 21
80 28 47
17 16 30
28 15 39
15 34 121
26 35 101 103
10 35 35
40 36 80
6 36
28 54 56
27 41 48
31 29 35
16 16 24
0 7
FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24

DSM (BU) Direct (BU) Traders (BU) Exchanges (BU)

Exchange has emerged as the fastest growing and largest segment within the ST Markets
Source: CERC MMC report Market -2024
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 PXs- Market Changing Nature of Transactions
Segment wise market share (%)
Segment wise market size (BU)
100%
6%
1%
0.00976239861885658
7%
133 140 140
8% 9%
4% 11% 0.0223963258138593 1.44351
0.049787148521002 0.0108413896529923
25% 120
111 120
80% 109
0.1176207568964029% 19% 33.0
25%
5.45 2.487
3%
100 100
0.181882959092321 10.0 21.0
Market Contribution (%)

81 8.9 11.7
60% 0.217803593137917
80 8.2

Volume (BU)
80 0.786

Volume (BU)
0.22664941569558
100% 64 8.7 19.91
0.9 30.17793
90% 60 9.47 24.186
40% 60 2.1
72% 75%
16.2
60% 40
50% 40
20% 42% 65.2
17 60.6 55.2 56.1
20
20 45.6
3 0.7
1.0
0% 0 14.8
FY 09 FY 12 FY 18 FY 21 FY 22 FY 23 FY 24 0 2.7
FY 09 FY 12 FY 18 FY 21 FY 22 FY 23 FY 24

RECs HPTAM GTAM TAM RTM

GDAM + DAM + HPDAM Market size (BU) (RHS) HPTAM GTAM TAM RECs RTM GDAM + DAM + HPDAM

 Collective: GDAM in October-2021 and later HP-DAM in March-2023

 Bilateral: GTAM in March 2021 and later HP-TAM in August-2023
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Contracts on Power Exchanges

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Contracts on Power Exchanges
Governing Provisions
 Section 66 of the Electricity Act 2003
 CERC (Power Market) Regulations, 2021

Pre-October 2021
 Electricity
 Day Ahead Market
 Intra Day
 Day Ahead Contingency
 Weekly
 Any Day (delivery from ‘T+1’ to ‘T+11’
days)
 Certificates
 REC and ESCerts

6-Oct-2021 – Hon’ble Supreme Court

Judgement on transaction
 Physical delivery to be regulated by CERC
 Financially settled to be regulated by SEBI
 CERC Order dated 7-June-2022
 Forwards upto 90 Days / 12-Weeks / 3-
Months

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 Existing Product Portfolio – Electricity and Certificate Segment
Daily One Auction session – Clear Green power, Conventional power and High Price power separately
Regulation 5(1) of PMR

Integrated Day
Price: Discover separate price for Green power, Conventional power and High Price power Double sided
Ahead Market
(IDAM)
Next day Delivery (96 time blocks) closed
Contract unit: 15 min
2021

bidding with
Uniform
Daily 48 Auction Sessions
Real Time Market Clearing Price
Next half hour delivery
(RTM)
Contract unit: 15 min

Intra-Day: Delivery starts 2 hr 30 min hence, operates on 24x7 basis

Regulation 5(2)

Contingency
of PMR 2021

Contracts Day Ahead Contingency: Delivery in next days 24 hrs (96 time blocks) Continuous
approved in 2009 Type of Power: Green, Conventional and High Price power Matching
and 2011 Benefit: Green power enables buyers to meet WPO/HPO / Other RPO requirement

Tradable certificate for Environmental attributes of RE Generation

Regulation 5(4)

Validity of REC: Valid till Redeemed

of PMR 2021

Renewable
Transaction: 2nd and last Wednesday of the Month
Energy Certificate
Price: Demand Supply dynamics
(REC) Double sided
Sellers: RE Generators, Discoms, CPPs based on RE and OAC
Buyers: Discoms, Captive Generators, OAC and Voluntary Participants closed
bidding with
Regulation 5(5)

Tradable certificate for Energy Efficiency mandates under Energy Conservation Act 2001 Uniform
of PMR 2021

Validity of ESCert: Valid till Redeemed Clearing Price

Energy Savings
Transaction: Every Tuesday of the Week
Certificate
Price: Floor price of Rs. 2,165/ESCert
(ESCert)
Buyers and Sellers: Designated consumers identified by BEE
BEE has announced to stop transaction in PAT Cycle III from 09.07.2024
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 Existing Product Portfolio – Electricity Segment
(Conventional, High Price and Renewable) Daily bidding session
Daily T+2-day delivery start up to T+90
Double
Bidding time 12:00 to 5:00 PM
Longer Duration Contracts

sided
Regulation 5(3) of PMR 2021

Daily bidding session open

Weekly Delivery from TW+1 to TW+12 bidding
Bidding time 12:00 to 5:00 PM with
Uniform
Daily bidding session Clearing
Monthly Delivery from TM+1 to TM+3 Price
Bidding time 12:00 to 5:00 PM

Any Day Buyer creates requisition for power (prescribing Quantum(MW), type, duration/time block) Reverse
Single Sided Seller participates in Reverse auction session during notice period auction
[Awaiting approval from CERC to increase delivery duration up to 11-month ahead under T-GNA]
Tertiary Reserve Ancillary

Day-Ahead Daily One Auction session – 10:00 Am to 11:00 Am

AS Regulations 2022

Ancillary Next day Delivery (96-time blocks)

Services Contract

Service Contract unit: 15 min Price

Discovery
Handled
Real-Time Daily 48 Auction Sessions By NLDC
Ancillary Next half hour delivery
Service Contract unit: 15 min
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Market Design Framework

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‘Re-think market design’ in Collective transaction
Necessity to discover ‘Uniform price’ in multi-power exchange model
 Existing market design in Collective transaction

 The multi-power exchange model discovers different prices for same bid area / Zone / State
creating undue confusion
 Market participants are unable to exercise choice of platform for participation and related-service
offerings as they prefer to transact on liquid platform
 Developing hedge instruments to address multiple price scenario is a non-starter

 Introduction of Market Coupling as provided in PMR 2021 helps discover ‘Uniform price’ in
same bid area and enable
 Choice of participation
 Develop common hedge instruments to mitigate participation risk
 Provide wider balance area to schedule infirm renewable power
 Better transmission congestion management

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‘Re-think market design’ in Collective transaction
CERC Suo-motu Order 1/SM/2024 dt 06.02.2024 – ‘Shadow Pilot on Market Coupling’
i. Develop, within two months from the date of this Order, the necessary software as required for running the shadow
pilot for coupling of RTM of the three power exchanges as well as coupling of RTM & SCED, and for coupling of DAM
of the three power exchanges. The software so developed should be scalable for running the shadow pilot for
coupling of DAM and SCUC, as and when decided by the Commission.
ii. Implement the shadow pilot of coupling
a. RTM of the three power exchanges
b. RTM and SCED and
c. DAM of the three power exchanges, for a period of four months after the development of the necessary software
iii. Share the operational experience of running a shadow pilot in the form of a monthly report during the period of
four months and a feedback report at the end of the four-month period.
iv. Suggest the feasibility of coupling of the DAM and SCUC within two months from the date of this order

 Shadow pilot phase to commence shortly

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Market Structure and Ecosystem

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Market Structure & Ecosystem
 Determinants to be borrowed from financial markets:
 Requirement of ‘Uniform Clearing Price’ to introduce hedging products as ‘long term risk mitigation tool’
 Innovative market surveillance tools, e.g. to prevent circular trading, etc.

 Missing ecosystem in the Indian power market:

 MOP report titled ‘ Roadmap for Development of electricity market in India’ identified long-term ‘eco-system’ for Indian
power market
― Implementation of Coupling of Power Market enabling Uniform Clearing Price

― Exchange based Capacity Contracts

― Introduce market based Secondary Reserve Ancillary Services

― Implementation of MBED considering Section 62 and Section 63 based plants

 Enhance competition in the market: Couple regulated and market mechanisms (Sections 62 and 63):
 Power exchange contracts operate under provision of Section 66 and PMR 2021
 Power exchange ensure fair, neutral, efficient and robust price discovery
 16 years of exchange operations has established bench-mark for extensive, quick and efficient price discovery and dissemination
 Prices discovered in PXs have given investment signals
 Long duration Contracts (upto 11 months) is a necessity

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Market Structure & Ecosystem
 Unify fragmented markets to create liquid, and deep market:
 CERC Order on ‘shadow pilot in market coupling’ provides building block for creating an integrated and deep market by coupling
RTM with SCED and coupling of DAM with SCUC
 Capacity market and Contract for Difference (‘CfD’). Contracts to integrate renewables
 Introduction of derivatives in electricity
 Allow PXs to provide long term solutions

 Industry’s expectations from the power market:

 CERC Order on ‘Shadow Pilot in market coupling’ provides the right framework to introduce new Contracts / Market
mechanisms, e,g.,
― Market Based Economic Dispatch (‘MBED’)

― Derivatives in electricity

― Capacity Market

― Contract for Difference (‘CfD’)

― Carbon market, etc.

 ‘Uniform Clearing Price’ enables introduction of hedging products for risk mitigation

 Efforts to integrate Renewable Energy (RE) more effectively in the power market:
 New Contracts, e.g., Capacity Market Contract and Contract-for-Difference (‘CfD’), are required to sustain investment in
Renewable energy
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Market Structure & Ecosystem
 Role of Aggregators play in the market's development:
 Aggregators enable grid-connected entities to transact on power exchange platform in fair and transparent manner
 Aggregators help in building liquidity in different exchange products
 Assist in development of ‘Peer-to-Peer’ transactions in RE space

 Capacity market and ancillary services market in India:

 Capacity Market and Ancillary Services Market enable to harness generating assets to better serve the demand
 Exchange based Contracts provide avenues for future investments in power sector

 Future of the Market-Based Economic Dispatch (‘MBED’) in India:

 On introduction of market coupling, implementation of long overdue MBED mechanism will result in ‘One nation One price One
market’
 To enhance the efficacy of the Day-ahead market, the MOP report enumerates road map as:-
― Market Coupling

― Security Constrained Economic Dispatch (‘SCED’) and Unit Commitment of NTPC thermal fleet

― MBED for NTPC thermal fleet

― MBED for full fleet of ISGS

― MBED for full fleet of ISGS + Market linked prices for any new capacities

― MBED for all generation

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Systems, Processes and Data

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System, Processes and Data
 Systems and processes currently missing in the Indian power market:
 Ease of data availability
 Transparent process of price discovery, integrated solution for Clearing and Settlement, value add services to market participant
for ease in decision making
 Hedging products for risk mitigation
 Integrated / Value chain transaction – ‘From energy source – transmission contract – scheduling and delivery – Climate change’

 Improvement required in data dissemination, market monitoring, and reliability:

 Availability of data in public domain
 Utilise fair, transparent and neutral platform of power exchange
 Quick dissemination of results
 Real time market surveillance

 Improvements needed in the settlement system and PSS Act:

 Power exchange is platform that enables transaction in electricity in a manner similar to Equity / Commodity exchanges, hence
power exchange should also be exempted from provisions of Payment and Settlement System Act 2007 (‘PSS Act’)
 Compliance under PSS Act will result in dual regulation for settlement processes, resulting in avoided cost and expenses
 Already PXs are performing excellently without any default
 Superiority of platform resulting in new Contracts being planned to introduce in power exchange, e.g. Carbon market

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System, Processes and Data
 Management of coupling of power markets and SCED:
 Coupling of RTM with SCED will provide depth to market and result in large scale cost optimisation
 CERC Order proposes market coupling mechanism would be managed by GRID-India

 Advancement required in APIs and data ecosystem to support market efficiency:

 Sharing of transaction information between Power exchange and System Operators, e.g. NLDC / RLDCs / SLDCs, and Market
participants, is made by utilising APIs and other IT tools which has resulted in increase in efficiency of transaction and quick
dissemination of transacted information
 Improved IT tools and APIs will be required in Settlement Systems

 Target to achieve a UPI-type moment in the Indian power market, streamlining transactions and
participation:
 Exchanges provide integrated services from ‘bid submission – price discovery – clearing – scheduling & delivery – settlement of
trade’
 Market Coupling in DAM, RTM followed by RTM + SCED and DAM + SCUC would streamline transaction and participation
 Integration of RE in Power market by introducing Capacity Contract and CfD

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System, Processes and Data
 Effective implementation of multi-part tariffs in RE:
 New Contracts in RE are required to provide market for non fossil fuel based installed electricity generation
capacity of 500 GW capacity till FY 2029-3O
 Capacity Market Contract and Contract for Difference (‘CfD’) types of Contracts are required to provide market-
based avenues for new investments

 Administration of transaction fee cap in market trading:

 Cap in transaction fee for trading and/or transaction in power exchange may be reconsidered
 Demand-Supply dynamics may decide transaction fee applicable in a Contract

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Trading, Platforms and Products

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Trading, Platforms and Products
 Emphasis on improving clearing and settlement processes, especially for smaller players:
Improvement in C&S process
 Different instruments, e.g., Cash, Fixed Deposit receipts, Bank Guarantee and Credit limit provided by Banks/ FIs / PFIs /
NBFC, are available as Collateral for transacting at PXIL
 Participants can avail these instruments for meeting their power trading requirement

 Efforts to introduce more choice and customised products in the power market:
Introduction of more choice and customised products
 Power markets are evolving to meet market participants requirements
 PXIL is geared to develop and offer new Contracts in near future, e.g. Capacity Contract, CfD, Carbon Market, Longer tenure
contracts upto 11 month ahead

 Role of banking as a product in the power market:

 Banking transactions being seasonal they are preferred by Discoms to meet their power trading requirements
 PXIL is keen to develop such Contracts once delivery duration upto 11-month are approved for introduction

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Trading, Platforms and Products
 Prospects for coupling Power Exchanges (PX) and SCED:
Prospects for Coupling PX and SCED

 The CERC Order providing for implementation of ‘shadow pilot ‘ by coupling RTM with SCED is a welcome
move that results in increasing social welfare and provide necessary depth to market
 The Order refers to simulations using bid data from power exchanges to study the impact of market coupling
on volume, prices, and economic surplus, as prescribed in PMR 2021
― Maximum increase in cleared volume was 1100 MW
― Price variation reduced by 5%, price cap hits declined by approximately 10%
― Average coupled MCP was lower than the average MCP of dominant exchange by Rs. 0.422/kWh

― Reduction of cycling instructions to generators, thereby leading to lower wear and tear, and hence improved
reliability
― Better congestion management

We believe the advantages will be manifold when full implementation of Market Coupling and present
entry barriers are eliminated in Collective transaction

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Trading, Platforms and Products
 AGC (Automatic Generation Control) as a market product:
 Battery Energy Storage System (‘BESS’) and Pumped Storage System may provide such service
 Secondary Reserve Ancillary Services (‘SRAS’) market is provided in Ancillary Services Regulation 2022
 PXIL is awaiting guidelines/procedure from CERC for introducing AGC/SRAS Market Contract

 Net pool vs. Gross pool approach in the Indian context:

 Better utlisation of generation resources
 Optimal utilisation of transmission assets
 Efficient price discovery
 “Right to Recall” to be taken care through RTM
 Improvement in financial health of Discom

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Disclaimer:

This presentation seeks to present the factual position relating to PXIL and our point of view on the prospects of Power Exchanges in general in the country. This presentation
is thus only a compilation of such points of view and does not guarantee anything in particular. The user of this presentation is advised to verify the data and refer to the
applicable Acts and Rules and Regulations before forming an opinion and taking any decision based on this presentation. This document is prepared on the understanding that
PXIL, its employees and consultants are not responsible for the results of any action taken on the basis of the information in this document or for any error in or omission from
this document. Further PXIL, its employees and consultants expressly disclaim all and any liability responsibility to any person who reads this document in respect of anything,
and of the consequences of anything, done or omitted to be done by such person in reliance, whether wholly or partially, upon the whole or any part of the content of this
presentation.

THANK YOU

POWER EXCHANGE INDIA LIMITED

Sumer Plaza, 9th floor, Unit no - 901
Marol Maroshi Road, Andheri (East), Mumbai-400 059, India
Tel: +91-22-4009 6600 Fax: +91-22-4099 6633
Email-id: info@pxil.co.in website: www.powerexindia.in
CIN:- U74900MH2008PLC179152

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Existing Market Design
Key structure
 Market reforms – Market Coupling for electricity transacted on Power exchanges
Power Exchange 1

S1 S2 MCP (E1)
Sellers E1
Market Clearing Prices (E1 , E2 & E3)
S3 S4 S1 B3 S3
(E1)

S2

B1 B2 B1 S4 B2 B4
Buyers E1
B3 B4
Power Exchange 2

S1 S2 MCP (E2)
Sellers E2
S3 S4 S1 B1 S2 S4
(E2)

Buyers E2 B1 B2 B3 B2 S3 B4

B3 B4
Power Exchange 3

S1 S2 MCP (E3)
Sellers E3
S1 B1 S2 S4
(E3)

S3 S4
MCP differs based on variation in Orders
Buyers E3 B3 B2 S3 B4 received during the auction session
B1 B2

B3 B4

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Envisaged Market design
Power Exchange 1 (E1)

S1 S2
Sellers E1
S3 S4 Market Coupling Operator Discovers ‘Uniform Market Clearing Price’

B1 B2
Buyers E1
B3 B4 S1 S7 S3 S2
Power Exchange 2 (E2)

S4 S5 S6 S4 S12
Sellers E2
S6 S7 B4
B1 B5

Buyers E2 B5 B6 B8 B9
B3

B7 B8
B10
B11
Power Exchange 3 (E3)

S8 S9
Sellers E3
S10 S11 Benefits of Market Coupling :
- Maximisation of overall Economic Surplus
Buyers E3 B9 - Optimal use of Transmission infrastructure
- Market price discovery vis-à-vis Exchange level price discovery
B10 B11
- Paves way for introducing – Derivatives in electricity, MBED and
Cross-border integration
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 Price Discovery Mechanism – Contract wise
Sr.
Name of the Contract Type of Clearing Price Discovery Methodology
No.
Integrated Day Ahead Market
1. Double Sided Closed Bid with Uniform
(G-DAM*, Conventional and HP-DAM) Collective
Price
2. Real Time Market
3. Day Ahead Contingency*
Bilateral Continuous Trade Session
4. Intra-day *
Double Sided Open Bid with Uniform Price
5. Daily, Weekly and Monthly Contracts* Bilateral

6. Any Day Singe Sided* Bilateral Reverse Auction

7. RECs Double Sided Closed Bid with Uniform

Collective
8. ESCerts Price

‘Pay-as-bid’ and ‘Uniform Price’

9 TRAS (Day Ahead and Real Time) Bilateral
[matching by NLDC]

 * - Participants transact in Conventional, High Price, Solar, Wind, Hydro and Other types of Renewable energy
 * - ‘Certificate of Purchase of Renewable Energy’ issued to Buyer
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