“This fiscal we aspire to achieve 100 billion units in terms of volume”, says Rohit Bajaj, IEX

Trading in India’s Green Day Ahead Market, ever since it started in October’21, and before that the Green Term ahead market (started in August 2020) has been on a growth path, hitting a high of 280 million units (MU) in January this year. Energy trading accounts for just 6% of the overall power market, with a target of 25% by 2024. With the market having a long way to go, considering the many changes the country will see on its way to the 500 GW renewable target by 2030, we spoke to Rohit Bajaj, Head and Senior VP, Business Development, IEX for his views.

1. We are well into year 2 since green energy trading started. Tell us about the journey so far, including seasonality.

Rohit Bajaj: The Green Market has seen a great traction amongst the market participants since its commencement and is today positioned as a key avenue for the consumers for procuring renewable energy in a flexible manner and at the most competitive prices. Seasonality plays an important role when we talk about power trading and due to seasonal fluctuations, the demand and supply keep on varying. Fluctuations in wind energy generation is an integral factor that determines trends in power trading as average wind generation is high during the high wind season in the country which starts around mid-May and goes upto Mid-September. However, starting October with the wind season surpassing its peak and gradually receding, similar pattern is observed in the volume numbers. During the ongoing financial year of the Green Term-Ahead Market (GTAM), sellers were able to leverage the surplus in the entire high wind season and this resulted in increased volumes. During the rest of the months of the year, the volumes remain comparatively low. Further, new green market segment – GDAM was also launched on 26 Oct’21, the participants are leveraging both the market segments to meet their demand-supply requirements optimally.

2. What are the price trends you can see?

Rohit Bajaj: IEX is leading the energy sector transformation by enhancing efficiency through competitive power prices and flexible power procurement for the distribution utilities as well as for the industrial consumers. IEX power price is a function of demand and supply and serve as a benchmark for the entire power sector value chain.  For FY21, the average price for solar and non-solar contracts under GTAM stood at Rs 3.67 per unit and Rs 3.97 per unit respectively. In FY22, till January the average price for solar and non-solar contracts under GTAM stands at Rs 3.64 per unit and Rs 4.18 per unit respectively. In our newly introduced Green Day-Ahead Market (GDAM) segment, we have so far recorded an average price of Rs 3.95 per unit.

3. How do costs within the REC segment compare?

Rohit Bajaj: Trading in the Renewable Energy Certificates (REC) Market resumed from 24^th November 2021 after a 16-month gap apropos supportive and facilitative orders from APTEL and CERC. Since then, we have conducted 4 trading sessions which takes place on the last Wednesday of every month. A total of 6.11 lakhs RECs were cleared in the latest trading session held on 23 February’22 at IEX comprising 4.44 lakhs Non-Solar RECs with clearing price at Rs 1,000 per REC and 1.67 lakhs Solar RECs with clearing price at Rs. 2300 per REC. There is a difference in prices as Non–Solar inventory is high vis-a-vis buy requirement and vice versa for solar.

4. Existing market shares in the power trading market and long-term trends as IEX sees it, with PXIL also making moves finally.

Rohit Bajaj: We are striving to develop India’s power market by working pro-actively in collaboration with all the stakeholders to build a deep and vibrant market on the Power Exchange. This fiscal year we aspire to achieve 100 billion units in terms of volume and going forward we expect the growth momentum to continue as India’s industrial and economic growth rebounds. With robust projections on the economic growth and expectation that electricity demand growth will be around 8%, IEX expects to garner a large share of the increase in demand for electricity through its platform. The Government also strives to deepen the power markets in the country towards supporting the aspiration to build a sustainable energy economy. The draft National Electricity Policy 2021 envisions 25% share of the power market by the year 2024, implying a 4x growth from the present 6% share of energy markets. This when realized will result in significant growth opportunities for the Power Exchanges. There is a space for multiple Exchanges. On our part we will continue to work in collaboration with the stakeholders for developing the power market with focus on innovation, and technology towards delivering greater customer delight.

5. What are the missing policy enablers to push energy trading further? Also, what has India got right so far.

Rohit Bajaj: Indian government has taken several initiatives to promote spot markets – on policy front, draft National Electricity Policy (NEP) aims to enhance spot market share in the total electricity market to 25% by 2023-24. Under the guidance of Ministry of Power and Hon’ble CERC, IEX has introduced Real Time Market, Green Term – Ahead Market (GTAM) and Green Day-Ahead Market (GDAM) which have enabled the renewable energy integration. We are now looking forward for the much-awaited Longer Duration Delivery Contracts in both electricity and renewables. We are also working on other new market segments such as Exchange based Ancillary Markets, Capacity Markets as well as Gross Bidding contracts. There are several initiatives and policy enablers such as rationalization of transmission charges, enabling of RE merchant capacity, uniform DSM regulations across states, removing non-tariff & tariff barriers for open access and implementation of General Network Access Regulations that are much required to further strengthen and deepen the share of power markets in the country.

6. Does the idea of power trading still need to be sold to potential participants? Who does that? Are there any perceptions/misconceptions around that?

Rohit Bajaj: Over the past 13 years, IEX has witnessed remarkable growth and now has a robust 7000+ registered participant base including 55+ DISCOMS and 550+ Electricity Generators. IEX commands a market share of around 95% in the power exchange market. Key exchange participants can be categorised into discoms, conventional & RE generators, captive and open access customers supported by traders. With the launch of new market segments like RTM, GTAM & GDAM, many new RE generators are showing interest for participating in exchange driven market segments. Over the years, the value proposition of exchange driven markets is well understood and appreciated by various market players. However, IEX regularly engages with all its stakeholders at different levels providing market updates, explaining new product segments and trading opportunities. The competitive price discovery on the platform provides an opportunity for cost optimization for market participants particularly Discoms leading to reduction in overall procurement cost. Some states like Andhra Pradesh are proactively leveraging exchange platform by replacing their costlier plants by exchange procurement and passing on savings to the customers. Some other states are also catching up now and starting to emulate the same.

7. How easy/difficult is it to become a participant in the energy trading market?

Rohit Bajaj: The process of becoming a participant in IEX is fairly simple. Any grid connected entity (both buyer or seller) with more than 1 MW contract demand or generation capacity after receiving clearance from the State or Regional Load Despatch centres (as applicable) have option to directly become members of the Exchange (proprietary member) or participate as a client through trader-members. The entire process is seamless and is generally completed in 1-2 days’ time.