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Interaction | January 2015

IEX plans to facilitate power trading in South Asia

IEX has already approached the Central Electricity Regulatory Commission (CERC) to seek in-principle consent to facilitate Cross-Border Trade on its platform, says Rajesh K Mediratta, Director (Business Development), IEX.

The Indian Energy Exchange has seen lower demand for electricity than supply in November-December. Will this situation continue in the coming months?
Yes, the demand has been low in the last two months primarily due to the onset of winter wherein the demand slows down significantly. As the season is progressing, the demand in the Northern region has seen an upswing whereas demand in the Western region is yet to pick up momentum.

Going forward, we expect the demand to be similar to the trend observed in September and October where the demand outpaced the supply.

The trend of buy and sell observed in the last six months is given in the table below:

Reports indicate that IEX expects to have participants from neighbouring Bangladesh and Nepal trading on its platform in the next few months. What is the expected size of these cross-border trade deals?
In the context of cross-border trading with the countries neighbouring India, IEX plans to facilitate power trading through the exchange platform among the South Asian countries, particularly with Nepal, Bangladesh and Bhutan to begin with. IEX has already approached the Central Electricity Regulatory Commission (CERC) to seek in-principle consent to facilitate Cross-Border Trade on its platform. Some of the recent developments in this regard are as below:

Nepal: The recent Power Trade Agreement (PTA) between India and Nepal was signed on 21st October, 2014. Both the governments intend to work towards development of a common electricity market.

Bhutan: Bhutan has established 400, 220 and 132 kV links from its power station to India and a total of five lines of 440 kV are under construction which are expected to be commissioned by the year 2017/18. Presently, the Dagachhu Power Plant of 126 MW built under the PPP mode intends to sell power in the Indian short-term power market which includes power exchanges.

Bangladesh: Bangladesh is already importing about 500 MW of power from India through a long and medium term PPA with the Indian entities. Out of this 500 MW, generally 450 MW to 470 MW is being supplied to Bangladesh leaving a gap of 30 to 50 MW which Bangladesh is considering to source through IEX. Further, it is also proposed to double the capacity of the transmission link (500 MW to 1,000 MW).

Is IEX on course to become a South Asian exchange on the same lines as Nordpool Spot (Scandinavian and Baltic countries) and EPEX Spot (France, Germany, Switzerland and Austria)?
IEX can potentially operate as a regional exchange like Nordpool Spot and EPEX Spot. In South Asian countries, the potential of operating exchanges within individual countries does not exist, since the size of the power system, diversity etc., is very limited except in India. An Indian Exchange can only provide a liquid pool of power with variety widely ranging from 1 MW to 1,000 MW size participants and with seasonal, geographical and temporal diversities. Our model is similar to that of Nordpool Spot and EPEX Spot. The model is modular and very scalable. Therefore, we see IEX becoming a regional exchange a reality in the near future.

What is the average amount of electricity traded on a daily basis on IEX? How many participants take part?
Today, IEX is trading about 80 MUs (FY14) on an average on a daily basis, trading a total of 29 BUs in FY 2014. The highest trade on a single day of 131 MUs was recorded on 11 October, 2014. The overall yearly traded volumes at IEX for the past four years are given below:

In terms of participation, as on date, over 3,300 participants across utilities from 29 States, 5 Union Territories (UTs), 200+ private generators and about 3,000 open access consumers are leveraging the Exchange platform to manage their power portfolio in the most competitive and reliable way.

Give us some indication of the trade in renewable energy certificates that you conduct on IEX and the growth prospects for the same.
As of today, IEX has a total of 2,297 participants registered in the REC segment. Of the total participants, 691 are Eligible Entities (RE Generators), 1,594 are Obligated Entities (discoms, Open Access Consumers & Captive Generators) and 12 are registered as Voluntary Entities.

Together, these entities have traded almost 70 lakh RECs (solar and non-solar RECs) since launch of trading at IEX in the year 2011. The highest ever trade of around 3.7 lakh RECs was recorded in the month of March´13 on our platform. The details of the REC trade in India are as given.

On date more than 114 lakh
RECs (solar: 5.4 lakh, non-solar:
109 lakh) lie unsold in the market. As a result, both solar and non-solar RECs have been trading at floor price. The growth prospects of the scheme are completely dependent on RPO enforcement by SERCs on the obligated entities.

To facilitate RPO enforcement we require stricter penalties under the Electricity Act, 2003 as well as initiate an IT-enabled framework to monitor RPO fulfilment on a regular basis. Another way to increase momentum in the REC market will be to facilitate a Voluntary REC Market.

The Companies Act, 2013 under Section 135 mandates companies to spend 2 per cent of their net profits on CSR activities. These provisions provide enabling framework to build a dynamic voluntary market in RECs.

Perhaps a branding and awareness campaign led by the Ministry of New and Renewable Energy (MNRE) will greatly help in this regard.

Devarajan Mahadevan

Yearly Volumes at IEX
Yearly Volumes(BUs)
Year Cleared Volume
2010 - 2011 11.8
2011 - 2012 13.8
2012 - 2013 22.4
2013 - 2014 28.9
TOTAL 76.9


Buy and Sell Volumes in FY 14-15
Year | Month Purchase Bids (Average MW
per Day)
Sell Bids
(Average MW
per Day)
2014 Apr 5,071 4,409
May 4,509 4,289
Jun 5,604 4,562
Jul 5,074 3,969
Aug 6,344 4,117
Sep 5,787 4,313
Oct 6,036 5,142
Nov 3,948 4,964
Dec (as on 24 Dec?14) 4,048 4,741


Yearly Volumes at IEX
  Accredited
Capacity
(MW)
Registered
Capacity
(MW)
RECs
Issued
RECs
Traded
Balance
Non-solar 4,330 4,090 17,817,353 6,896,731 10,920,622
Solar 555 532 638,347 96,143 542,204
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