Indian Energy Exchange (IEX) has initiated power trading for an extended period after receiving approval from Central Electricity Regulatory Commission (CERC).
The company provides an electronic platform for short-term power transaction to customers that do not have long-term power purchase agreements (PPAs). Besides, the exchange also assists those who wish to procure power to mitigate the supply-demand gap.
This is done through various segments namely day-ahead market (DAM), real-time market (RTM) and term-ahead market (TAM) available across conventional and renewable energy markets. Among these, IEX was allowed to deliver contracts valid for a maximum period of 11 days under TAM.
The new regulation now allows IEX to execute contracts for up to three months.
How will the process work?
The longer duration contracts would be carried out via reverse auction. However, only buyers can initiate these auctions by quoting their requirement for power and delivery period.
The responsibility of IEX is to publish trading calendar for the auction consisting of interest stage, IPO stage, reserve auction stage and allocation stage.
1. Seller can participate in auction by submitting the bid quantity in the interest stage.
2. In IPO stage, sellers are required to quote their bid price along with technical minimum quantity. Here, those sellers will be eliminated whose total aggregate sell quantity is more than double the buyer’s requirement.
3. In the reverse auction stage, the sellers that qualify the IPO round, will take part in final bidding around lowest price (L1) published by IEX. The process will end once new L1 rates are stopped publishing.
4. In the final stage of allocation, the buyer will be provided with L1, L2, L3 rates based on which a particular bid can be accepted/rejected.
Benefits
The new regulation would help IEX to fetch higher transaction volumes. At the same time, it will provide customers relief from market volatility as they can procure electricity at fair prices derived from competitive bidding.
Notably, spot electricity prices in DAM have recorded a substantial growth of 143% y-o-y to INR 7.76/unit during April-June, 2022 as a result of soaring power demand which led to frequent power cuts across states.
Several firms have already placed their tenders for power procurement upon the commencement of the long duration contract. These include the likes of Assam Power Distribution, Jindal Stainless and Arcelor Mittal/Nippon Steel India.
Auction schedule
Quantity in mega-watt
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