IEX Gets CERC Approval For High Price Day Ahead Market (HPDAM) Trading

In an interesting development that will benefit the high variable cost generators to participate in the power trading market, the Indian Energy Exchange (IEX) has got final approval from the Central Electricity Regulatory Commission (CERC) to introduce trading in High Price Day Ahead Market (HP-DAM) contracts. The move, and approval by the CERC was necessitated by the Rs 12 cap on power costs, imposed last year and still continuing.

The eligible sellers for the HP-DAM category would be

1) Gas based Power Plants using imported RLNG and Naphtha

2) Imported Coal based Power Plant using imported coal.

3) Battery Energy Storage Systems (BESS)

4) The category of plants eligible to participate in HP DAM shall be subject to quarterly review by the Central Commission

The entry of Battery Energy Storage Systems marks the entry of what would probably be renewable energy based systems into the HP-DAM, and will probably encourage further investment in the category. Many stand alone BESS systems do have a power selling cost of over Rs 12 for now, depending on the technology used.

While setting a price band between Rs 0 to Rs 50/kWh, the CERC also took care to drop the proposal for an upper limit of Rs 99 for the negative price signaling effect it could have on the market. IEX had proposed Rs 99 since it’s trading system can handle two digit numbers, and they went with the maximum after taking the highest variable price recorded by a gas based plant of Rs 58/kWh in Maharashtra.

IEX had also proposed that price determination shall be carried out separately for GDAM, DAM and HP-DAM, whereas other processes like bidding, settlement and scheduling will remain combined for all the three contracts in I-DAM with clear identification of Renewable/Conventional/High Price transactions. The price discovery and market clearing will take place in a sequential manner i.e., first GDAM will be cleared followed by DAM and HP-DAM. The participants (buyers and eligible sellers) will also have the option to transfer unselected bids in DAM to HP-DAM with the flexibility to specify different prices.

For NLDC, in case of any curtailment, the HP-DAM would obviously be the first to be curtailed, followed by followed by the transactions in DAM, then in GDAM and finally in RTM.