Comments on CERC’s Staff Paper: Developing a Common Platform for Electricity Trading

1. Comments on CERC’s Staff Paper: Developing a Common Platform for Electricity Trading S. A. Khaparde, A. R. Abhyankar and V. Sarkar Indian Institute of Technology Bombay

2. Topics of suggestions • Congestion Management • Issue of congestion surplus • Utility of market splitting under meshed network situation • Transmission Pricing • Compatibility of PX transmission costs with those of bilateral trades • Ex-ante or ex-post? • Point-of-connection (POC) scheme

3. Suggestions related to Congestion Management

4. Proposed approach for handling congestion surplus 150 MW 50 MW Area A (2000Rs/MWh) Area B (3000Rs/MWh) 100 MW 150 MW 50 MW

5. Proposed approach for handling congestion surplus (con..) • Original pricing rule: • Generator at area A is paid a price of 2000Rs/MWh • Load at area A pays a price of 2000Rs/MWh • Generator at area B is paid a price of 3000Rs/MWh • Load at area B pays a price of 3000Rs/MWh • ISO collects a net congestion surplus of 100000Rs/h

6. Proposed approach for handling congestion surplus (con..) • Proposed pricing rule: • Generator at area A is paid a price of 2000Rs/MWh • Load at area A pays a price of 2000Rs/MWh • Generator at area B is paid a price of 3000Rs/MWh • Load at area B pays a price of (50*3000+100*2000)/150= 2333.33Rs/MWh • ISO collects a net congestion surplus of 0 Rs/h

7. problem of power mixing 100 MW 180 MW Area A (2000Rs/MWh) Area C (3000Rs/MWh) 100 MW 80 MW 200 MW 100 MW Area B (2200Rs/MWh) 200 MW 70 MW 120 MW Area D (3500Rs/MWh) 70 MW 130MW

8. Problem of power mixing (con..) • Area ‘A’ & ‘B’ are generation surplus areas • Area ‘C’ & ‘D’ are generation deficit areas • 100 MW from area ‘A’ and 50 MW from area ‘B’ are mixed first to form a net surplus amount of 150 MW. • Areas ‘C’ and ‘D’ get shares in this mixed amount in a ratio of 8:7 • It can’t be immediately determined how much power is delivered from a sending end area to a receiving end area • Therefore an additional tie-breaking strategy is required to implement the proposed method • Principle of proportional sharing may be adopted for the purpose of tie-breaking

9. Compatibility of Nord Pool version of area pricing with Indian system • Nord Pool approach of market splitting considers only area power balance and inter-zonal capacity limit constraints • This approach is mainly applicable to a radial system where removal of any inter-zonal link separates the original system into two totally disconnected systems • In case of a radial system, for a certain zonal injection and withdrawal pattern, power balance equations give a unique solution to the inter-zonal flows • However, for a meshed system, Nord Pool approach may lead to multiple solutions • Unfortunately, our system is a meshed system

10. Structure of the Indian system NR NER ER WR SR

11. Structure of the Indian system (con..) • Three loops are there in the system • NR-WR-SR-ER • NR-WR-ER • WR-SR-ER • There is no synchronous loop in the current system • However, an additional tie breaking strategy is to be designed to distribute the net incoming or outgoing flow of each of the regions NR, WR, SR & ER over the corresponding interfaces • In presence of synchronous loop, Nord Pool approach will fail!

12. Our proposal • To go for a direct OPF based congestion management mechanism considering regions as nodes • Joint clearance of power exchange and bilateral trades for a better utilization of transmission resources • Financial transmission rights to give financial security to bilateral traders • Setting up curtailment priority among the bilateral trades by means of transmission service request mechanism

13. Suggestions related to Transmission Charges

14. Compatibility of PX transmission costs with bilateral trades • It is not clear whether the transmission charges for PX in Rs/MW/Hour would be comparable with prevailing long term rates or short term rates? • The staff paper mentions that the usage of pre-assigned transmission capacity by PX on inter-regional corridors shall be ‘akin’ to long term usage. • If this is so, whether, the charges would be comparable with long term rates?

15. Compatibility of PX transmission costs with bilateral trades (con..) • We believe that the PX trades and short term bilateral trades would act as two parallel activities for sale and purchase of power. • It is expected that the PX would help the price discovery for bilateral transactions • This would hold true only if the entities involved in both mechanisms are subjected to common transmission prices • Common platform for transmission capacities mandates common platform of its pricing • The transmission charges for PX trades and short term bilateral trades should be comparable

16. Ex-ante or Ex-post? • No specific details about socializing total transmission cost among the participants are given in the staff paper • Ex-post scheme of transmission usage charge • Members of PX would come to know about their share in transmission cost, only after market clearance • If the costs are made distance based or direction sensitive (rightly so!), then participants are exposed to vagaries of transmission charges • Socializing transmission costs does not necessarily mean assigning charges based only on MWs traded

17. Our Suggestions • The transmission pricing scheme should be ‘ex-ante’ • The transmission charges should be sensitive to distance and topology of the network • This gives rise to appropriate price signals for generator and load investments • The ‘point-of-connection’ (POC) transmission tariff provides a good solution to the above problem

18. Point-of-Connection (POC) Scheme • The payment at one point, the point of connection, gives access to the whole network system, and thus the whole electricity market place • Single charge in Rs/MW/Hr, depending upon the level of connection • Real power tracing can be employed to arrive at point charges in POC tariff • Tracing results are topology dependent and hence give rise to spatially variant price signals • POC scheme can be applied to both, i.e., PX trades and short term bilateral transactions

19. Thank You sak@ee.iitb.ac.in