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TRANSCRIPT
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Power Exchange India Limited
Presentation to APEX
Updates from the Indian Electricity Markets - Introduction to
Environmental Products
New Delhi, March 7, 2011
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Evolution of Competitive Power Market
Major policies & regulations introduced
The Electricity Act, 2003De-licensing of generation
Development of a multi-buyer multi-seller framework in power
Introduced Trading & Competitive Bidding for procurement of electricity
National Electricity Policy, 2005Measures to promote competition aimed at consumer benefits.
Promote competition for optimal pricing of power
Open Access Regulations, 2008Separation of “transmission ownership” and “system operation”
Universal Open Access to transmission networks
National Action Plan on Climate Change, 2008Promotion of Renewable energy market through power exchanges
Promotion of energy efficiency market through power exchanges
Power Market Regulations, 2010 Providing a regulatory framework for Competitive markets
Guidelines and prudential norms for setting up and operating power exchanges
Guidelines on listing contracts on power exchanges
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Evolution of Competitive Power Market
Institutional capacity augmented
Independence of system operators
Separate transmission ownership from load management functions
To make load dispatch centers financially self-reliant and autonomous
Independence of Regulators at state and national level
Regulate electricity tariff and related matters
Advise Government on formulation of NEP
Promote competition and efficiency in electricity sector
Appellate Tribunal For Electricity
Protection of consumer interest
Formation of Power Exchanges
Provide national level transparent marketplace for electricity transactions
Ministry of Power focused on policy making roles
Creating environment conducive for development of competitive power market
Central Electricity Authority entrusted with planning role for the electricity system
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2003 June –enactment of
EA 2003
2006 July – CERC issues staff
paper on PX
2007 February –guidelines on setting
up PX
2008 January –guidelines
for collective
transactions
2008 June -guidelines for scheduling of transactions
on PX
2008 October –
instructions for multi exchange scenario
2010 January –Power Market
Regulations
In transition towards a competitive market structure
Evolution of Competitive Power Market
Development of Power Exchanges
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Indian Power SectorCurrent Status
One of the largest interconnected power network in the world
4th largest in Asia and 6th largest in the World in terms of installed capacity
Generation Capacity of 170228 MW, as on 31st
January 2011
Capacity addition of 21441 MW during FY 2010-11
Operating on competitive regime
Energy deficit of about 7.6% and peak demand deficit of 11.1%*
Pre-dominance on fossil fuels, especially coal
Impetus to include Renewable Energy in mainstream
Focus shifting towards efficiency in operations
Sou
rce:
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,*D
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01
1
8
65%
3%
22%
10%
Sources of Generation
Thermal
Nuclear
Hydro
Renewable
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Transaction StructureLargely tied-up through PPAs
Short term bilateral market dominated by 5 players accounting for over 85% volume
Low liquidity in short term market due to
Insufficient power left for short term trade
Non-standardization of electricity trading products
PXs need to compete with OTC as well as the real time balancing mechanism
Ownership structureBoth Central and State Govts have control
Single-buyer model in most States
Supply deficit has led to 19,509 MW of Captives
Poor credit quality of Utilities due to
Heavy “Cross Subsidy” burden
Huge Technical and Commercial Losses
Restrictive policies of State governments in giving “Open Access”
Indian Power Sector – Commercial Structure
50%
32%
18%
Generation Capacity
States Central Sector Private Sector
90.69%
4.43%3.56% 1.32%
Types of Transactions
Long Term PPAs Bilateral Short TermBalancing PXsS
ourc
e: C
EA
Sourc
e: C
ER
C
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Growth of Short Term Market
2
2.5
3
3.5
4
4.5
0
5
10
15
20
25
30
35
2007 2008 2009
Qu
an
tum
in B
illio
n U
nit
s
Year
Short term Trade
Quantum in Billion Units
Short term trade as %age of total
The Total Market has grown from 20 TWh in 2007 to more than 30 TWh in 2009
Till third quarter of 2010, it has grown to about 50 TWh
Pro active grid management by system operator
Market acceptance of weekly product
The annual compounded monthly growth in the electricity transacted through exchanges
has been 6.05%, highest amongst all the segments of short term market manifesting the confidence of participants in exchanges
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Success of Power Exchanges - Participation
More than 600 participants
Participant profiles
Utilities
Generating Companies
Captive Participants
Industrial Participants
Open access customers
Key Drivers
Simplified Membership process
Competitive Transaction Cost
Enabling provisions of open access in States like TN/Punjab/Rajasthan
Robust Risk Management
Prudent payment mechanism
0
100
200
300
400
500
600
700
Members + Clients
OA Consumers
Increasing Participants at Exchanges
No
. of
Pa
rtic
ipa
nts
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Challenges Faced - Transmission Allocation
Infrastructure
5 Electrical Regions, More than 25 Control areas
Transmission constraints across regions
Allocation of Available Transmission Capacity in the following order
Long Term – More than 25 years
Transmission access given for specific seller and buyer
Transmission pricing as a regional socialization
Short Term – Upto 3 months
Transmission pricing through Contract Path Method
Day-Ahead Spot Market – For the next day only
Transmission access for trades through Power Exchanges - Collective transactions
Point of connection tariff – equal price for connection from anywhere in India
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Challenges Faced – Transmission Congestion
Congestion management is handled through classical market splitting
In case of congestion, market is split into deficit and surplus markets with flow on
the intervening corridor restricted to that allowed by System Operator
Results in price differential across markets
The congestion revenue (differential price multiplied by volume) is collected by
exchanges and sent to SO on daily basis.
Seasonal Congestion
Congestion on account of transmission constraints
Seasonal localization of demand due to high demand and low availability of power
Congestion in Northern Region during January to March
Congestion in Southern Region during August to December
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Mainstreaming Environmental Products Key Driver– National Action Plan on Climate Change
NAPCC – India’s commitment to mitigate carbon emissions
Solar Mission
Energy Efficiency
Sustainable Habitat
Water Mission
Himalayan Ecosystem
Green India
Agriculture
Strategic Climate Change
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Mainstreaming Environmental ProductsForms
Renewable Energy Certificates
Energy Efficiency Certificates
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Renewable Energy Certificates Enablers
Provision in EA 2003 to promote generation of electricity from
RE sources
National Action Plan on Climate Change
Renewable Purchase Obligations from SERCs
CERC notification dated January 14, 2010
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Renewable Energy CertificatesSalient Features
Market based instrument
Provides evidence that a generator has produced a certain quantum of power from a RE
resource which has been consumed
Reflects the environmental attributes of the source of generation
Can therefore be traded in the market to allow entities to meet their Renewable Purchase
Obligations
Distribution of RE resources is not uniform across the country
Location of plants may not be possible in various States
States with higher RE potential may have difficulty in absorbing larges amounts from RE
sources / issues of costlier electricity
Increased flexibility for participants to carry out RE transactions
Reduce transaction costs for RE transactions
Create competition among different RE technologies
REC transaction to happen through power exchanges
First session expected by October 2010
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Obligated Entities
Obligated Entities (Transactions through
Power Exchange)
Renewable Energy CertificatesConceptual Framework
RE Generation
Sale at preferential tariff
Sale in REC Framework
(separation of electricity and environmental attribute)
Electricity Component
Distribution Utility at a price not more than average pool price
Third Party sale on mutually agreed
prices
Sale through Power Exchange
Renewable Component (REC)
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Renewable Energy CertificatesRegulations – Salient Features
Two type of Entities defined in Regulations:
Eligible Entities (EE) – Generators who can only sell REC’s
Obligated Entities (OE) – Entities having RPO from SERC who can only buy
NLDC would be the Central Agency which would be responsible for
Registration, Issuance, Redemption, Settlement, Repository, etc.
Central Agency would be supported by State Level Agency
Eligible Entity to undergo Accreditation process with State Agency and a
Registration process with Central Agency
Renewable Energy Source would be as declared by MNRE from time to time
1 MWh of Electricity injected would be eligible for 1 RE Certificate
REC would be traded only once - through Power Exchange
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Renewable Energy Certificates Eligibility Criteria
RE Generators are eligible for issuance of RECs, ifIt has obtained accreditation
It does not have a PPA for sale at preferential tariff; and
It sells the electricity generated to
Distribution licensee of the area at a price not exceeding the pooled cost of power, or
To any other licensee / OA consumer at a mutually agreed price, or
Through a power exchange at market determined price
Obligated entities are Distribution Utilities
Captive Consumers
Open Access Customers
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Energy Efficiency Certificates Enablers
Provision in Energy Efficiency Act 2001 to promote EnergyEfficiency
National Action Plan on Climate Change through NationalMission on Enhanced Energy Efficiency
Perform, Achieve and Trade Mechanism
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Energy Efficiency Certificates Introduction
The "Perform, Achieve and Trade" (PAT) mechanism is the most innovative
and challenging initiative under NMEEE
Scheme to incentivize higher plant efficiencies
Market based mechanism to promote energy efficiency
Currently in development phase, trading expected to commence by 2012
Energy efficiency improvement targets assigned to most energy-intensive
industrial units in the designated sectors
Power, Fertilizer, Chlor-Alkali, Iron & steel, Cement, Textile, Pulp & paper,
Aluminum and Railways
Energy Efficiency targets to be expressed in absolute terms
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Energy Efficiency Certificates Main Stages
Goal setting: Specific Energy Consumption (SEC) targets
Plant-wise, depending on level of energy intensity
The target specifies the percentage by which the plant has to improve its energy
intensity from the base value in during compliance period (three years).
Reduction phase: Stipulated time period
The designated consumers (entities) are expected to implement energy efficient
processes and technologies to reduce their energy intensity according to their target.
If the consumers fail to meet their targets, the consumer will have to pay penalties.
Trading phase: Proposed to be on a continuous basis
Entities that reduce SEC beyond target will be credited tradable ESCerts.
ESCerts can be sold to obliged entities who failed to meet their targets.
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Energy Efficiency Certificates Conceptual Framework
• Assessment of energy consumption & SEC
• Establishing baseline energy consumption normsBaseline Study
• Setting EE targets
• Defining compliance period Target Setting
• Scheme Participants, Roles and Responsibilities
• Market structure
• Liquidity, tradability and fungibility
• Trading Cycle
Market Design
• Scheme Participants, Roles and Responsibilities
• Implementation & Registration of EE projects
• MVR & Issuance of EE certificates
• Trading & Redemption of EE Certificates
Institutional Design
• Draft regulations governing the over-all PAT Mechanism
• Stakeholder consultation & inputs required before freezing draft regulationsRegulatory Framework
• Final Draft Regulation Regulations
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Energy Efficiency CertificatesTransactions through Power Exchange
Energy Efficiency Certificate (ESCert) is a market based instrument
Accounting tool to demonstrate that certain amount of energy has been saved
Industrial units that achieve savings in excess of their target will be provided
the excess savings as ESCerts
Units that underperform can buy these ESCerts to meet their compliance
target requirements
Opens a window for development of energy efficiency market
Achieving Energy Efficiency at least cost
ESCerts to be traded through Power Exchanges, just like RECs
PXIL mandated to develop Market and Institutional Framework for implementation of PAT Mechanism
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About UsPromoters and Equity Partners
EQUITY PARTNERS
Central Government Entities State Government Entities Private Sector Entities
PFC LimitedGUVNL JSW Energy Limited
MPPTCL Tata Power
WBSEDCL GMR Energy Limited
PROMOTERS
National Stock Exchange (NSE)
National Commodity and Derivatives Exchange(NCDEX)
PXIL leverages on:- experience of Promoters in running exchanges- experience of State government entities and- the most active private players in the country
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About UsProducts and Services
Physical Market
Day Ahead Spot Collective uniform price auction for day ahead delivery
Day Ahead Contingency Bi-lateral discriminatory price auction for contingency
Weekly Bi-lateral discriminatory price forward auction for physical delivery
Environmental Products
Renewable Energy Certificates (REC)
Tradable certificate for environmental attribute of RE generation mandated to be transacted through power exchanges
ESCerts Tradable instrument reflecting energy efficiency efforts proposed to be transacted through power exchanges
Other Services
Training and Capacity Building
• Creation of PM- Center of Excellence• Association with prestigious national and international institutions
Strategic Advisory Issue based advisory focusing on development of self regulating markets in India
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THANK YOU
Address POWER EXCHANGE INDIA LIMITED "B" Wing, 3rd Floor, Exchange PlazaBandra Kurla Complex, Bandra (E)Mumbai - 400051, India.
Email [email protected]
Website www.powerexindia.com
Telephone No:Fax No:
+91 22 2653 0500+91 22 2659 8397
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