power trading.pdf

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POWER TRADING

Shilpi Mukherjee


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Introduction

In economic terms, electricity is a commoditycapable of being bought, sold and traded.As defined in Electricity Act 2003, Trading meanspurchase of electricity for resale thereof and theexpression "trade" shall be construedaccordingly.Trading is a licensed and regulated business asper Electricity Act 2003CERC notifies procedures, terms and conditionsfor power trading


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Evolution of Power Market

To meet short term demand the statesresorted to trading of power through bilateraltrading agreements.States resorted to energy banking where insurplus state would supply energy to a deficitstate and in deficit situation vice versa.But when both the states were deficit it gaverise to complications.


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Benefits provided by power

exchangesCommon platform for trade of electricityTransparent mechanism of price discoveryMeeting peak demandOverall Demand Optimization


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Benefits provided by power

exchangesNo need to search for buyers and sellers, thuseliminates search cost.

Sell / Buy all across the nation.No need to negotiate for the prices unlike inBilateral Contracts.

Power exchanges act as counterparty, thus aparticipant need not to assess the risk profileof the other participant


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Services provided by traders

Facilitation to reduce geographical, seasonaland daily gap between demand and supplythereby encouraging optimum use of existingassets.Assured physical delivery based on availabletransmission corridors.


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PROVISIONS IN THEELECTRICITY ACT 2003 FOR

POWER TRADING


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Sectio

n

PROVISION

2(26) "electricity trader" means a person who has been granted a license to

undertake trading in electricity under section 12;

2(71) "trading" means purchase of electricity for resale thereof and the

expression trade shall be construed accordingly;

12 No person shall -a) transmit electricity; or

b) distribute electricity; or

c) undertake trading in electricity,

unless he is authorized to do so by a license issued under section 14, or is

exempt under section 13:

14 Provided also that a distribution licensee shall not require a license to

undertake trading in electricity.


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Collective Transaction

Exchange is a platform on which buyers andsellers gather to trade in a commodity. Thebuyer does not come to know who the selleris and the seller does not come to know whothe buyer is.The buyers and sellers remain anonymous toeach other, so that the bigger players will notbe in a position to influence the smallerplayers. In this a there will a level playing fieldfor all the participants.


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Price and Volume Determination

in an exchange-


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ILLUSTRATION OF CLOSED AUCTION

BIDDING PARTICIPATING SELLERS

Sl No Seller Sale Bid

1 S1 50 MW at Rs 5,500

2 S2 10 MW at Rs 6,000

3 S3 40 MW at Rs 7,000

4 S4 50 MW at Rs 8000

5 S5 50 MW at Rs 9,000

6 S6 50 MW at Rs 10,000


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ILLUSTRATION OF CLOSED AUCTION

BIDDINGSl No Buyer Purchase Bid

1 B1 10 MW at Rs 10,000

2 B2 40 MW at Rs 9,0003 B3 50 MW at Rs 8,000

4 B4 25 MW at Rs 8,000

5 B5 25 MW at Rs 7000

6 B6 50 MW at Rs 60007 B7 50 MW at Rs 5,500

PARTICIPATING BUYERS


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The Sellers

S1S2

S3S4

S5 S6

B1B2

B3 B4

B6B5

B7

The BuyersTrade MatchedSelected Sellers : S1,S2,S3,S4 (partial)Selected Buyers : B1,B2,B3,B4MCP :Rs 8000/MWh Volume: 125 MW

125

50 MW @ Rs

5,500

40 MW @ Rs

7,000

50 MW @ Rs

8,000

50 MW @ Rs9,000

50 MW @ Rs10,000

10 MW @ Rs6,000

10 MW @ Rs10,000

40 MW @ Rs9,000 50 MW @ Rs

8,0a00

25MW@ Rs8,000

25MW@ Rs

7,000

50 MW @ Rs

6,00050 MW @ Rs5,500


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SELECTED SELLERS AND BUYERS

Sl No Seller Cleared quantum

1 S1 50 MW at Rs 8,000

2 S2 10 MW at Rs 8,000

3 S3 40 MW at Rs 8,000

4 S4 25 MW at Rs 8,000

Sl No Buyer Cleared quantum

1 B1 10 MW at Rs 8,0002 B2 40 MW at Rs 8,000

3 B3 50 MW at Rs 8,000

4 B4 25 MW at Rs 8,000

SUCCESSFUL SELLERS

SUCCESSFUL BUYERS


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Factors affecting

electricity pricesEffect of Demand on PriceEffect of ATC & Congestion on prices

Effect of external factors on pricesEffect of UI charges on pricesEffect of holidays on prices

Effect of Weather on Prices


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Sr. No Category of theTrading License Volume of Electricityproposed to be tradedin a year

Net Worth (Rs.in Cr)

1 Category I No limit 50.00

2 Category II Not more than 1500 Millionunits

15.00

3 Category III Not more than 500Million units 5.00

3 Category III Not more than 100Million units

1.00

Categories of Traders


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UI market

Bilateral+IEXtrading market

Long-term market (92%)

4 %5 %

State Sectorgeneration

45 %

Central Sectorgeneration

37 %PvtSectorGeneration

9%

Electricity Market Segments

Short-termmarket (8%)

Bilateral Market (56%)Through Traders

43%

Direct Trading

13 %

UI (39 %) IEX(5%)

Short-term Market


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Effect of Demand on Price

0

5000

10000

15000

20000

25000

30000

35000

40000

0.00

5.00

10.00

15.00

20.00

01-08 May 09-15 May 16-23 May 24-31 May 01-08 Jun 09-15 Jun 16-23 Jun 24-30 Jun

MWh

R s

/ u n

i t

Max MCP(Rs) Av MCP(Rs) Purchase Bid Sale Bid MCV(Mwh)

Sale Bids

Source: IEX

Max MCP(Rs/unit)

Purchase Bids

More is the demand, More is the price


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Growth In Short Term Market

Growth in Short Term Market

0

1500

3000

45006000

7500

9000

10500

FY 04-05 FY 05-06 FY 06-07 FY 07-08 Upto Oct'08

Year

N o o

f T r a n s a c

t i o n s

( U n i t

)

0

5000

10000

1500020000

25000

30000

35000

A p p r o v e

d E

n e r g y

( M U s )

No of Transactions (Unit) Approved Energy (MUs)


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Thank You

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