presentation on power markets

Upload: himanshukapur

Post on 07-Apr-2018

227 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/6/2019 Presentation on Power Markets

    1/24

    by

    Ravindra Choubey,

    SBI Capital Markets Ltd.

  • 8/6/2019 Presentation on Power Markets

    2/24

    Agenday Indian power market

    y A brief history/background

    y Basic terms- grid, frequency, HVDC, Open access, UI

    y ABT

    y PLF Era

    y Grid failures and black starts

    y Supercritical Technology

    y Power Tradingy Clearing & Settlement Mechanism

    y Congestion Management

    y Investors perspective

  • 8/6/2019 Presentation on Power Markets

    3/24

    Backgroundy Concurrent subject Center & States can make laws

    y Multiple States & Jurisdictionsy Single buyer (SEB) model is still in practicey Discoms continue to be controlled by State government

    y History:y Political interference in operations, lack of access to funds and paucity of any

    incentive to better performance ensured dismal performance of SEBsy Low PLF since 1950s led to central PSUs NTPC, NHPC in 1975y While WB aided CPSUs did ICB for machinery, state generators had to be

    contended with local manufacturersy Capacity addition programs have dismal record

    y SEBs Continue to be loss making

    y High cross-subsidization within States free power to farmersy Control on defualters/Low-paying customers still not doney High inefficiencies in T&D, operations especially collections

    y Move from incentive based generation to ABT.

    y EA 2003 enacted , NEP 2005 come into effecty Open Access to transmission lines controlled by State Transmission Utilities

  • 8/6/2019 Presentation on Power Markets

    4/24

    India Power Scenario-Generationy Basic terms- grid, frequency, HVDC, Open access, UI, SLDC, RLDC, NLDC, Over

    & Under drawl, merit order dispatch

    y ABT: Availability based tariffy

    Declared capacityy Scheduled generation (daily)y Demand side management (brown out)y UI rates:

    y Frequency basisy Penalties & profitsy

    Regulated markety Improvised grid health and stability Frequency single most

    important indicator of Grid health.y Freq. rises as generation exceeds demand & drops when demand outstrips supplyy Extreme cases: Under-frequency relays operate to trip lines/Turbines throwout

    from pedestal

  • 8/6/2019 Presentation on Power Markets

    5/24

  • 8/6/2019 Presentation on Power Markets

    6/24

    Frequency UI Curve

    Lower freq. steeper profits Higher Frequency smaller penalties.

    The maximum UI values and slopes(incremental UI/freq. change) on eithersides keep changing as per feedback from Consumers & Generators.

    Eg. In case of Guj.CS: UI of 701 MW at Rs.3.01/unit works out to Rs.5 Cr/day loss

  • 8/6/2019 Presentation on Power Markets

    7/24

    Operational Efficiency ofIPPy Scheduling

    y Regional level real time inputs from generators & Transmission line datay National level grid power flows controlled by SLDC and NLDC in coordination

    with RLDC

    y Role of RLDCy responsible for optimum scheduling and despatch of electricity within the

    region in accordance with the contracts entered into with the licensees orgenerators in the region.

    y monitor real time grid operationsy keep accounts of quantity of electricity transmitted through the regional grid.y exercise supervision and control over the inter-State transmission system.

    y Optimised Generation under ABT regime for UI and trading benefitsy Capacity declarationy generation to best avail low frequency benefitsy Fuel stock management (link - tolling arrangements)y Quick load ramp up and ramp down

  • 8/6/2019 Presentation on Power Markets

    8/24

    Steam Parameters Turbine Heat

    Rate Trends in Indian UnitsSL.NO

    YEAR STEAM PARAMETER UNIT SIZE (MW) HEAT RATE

    (KCAL/KWHR)

    1. 1947-50 28 ata , 400 deg C 10 - 15 -

    2. 1951-60 60 ata, 482 deg C 30 - 57.5 2470

    70 ata 496 deg C to 90ata, 535 deg C

    60 - 100} 2370

    3. 1961-76

    130 ata, 537/537 deg C 110 - 120 2170-2060

    4. 1977-82 130 ata, 537/537 deg C 200 / 210(USSR) 2060

    5. 1983 150 ata, 537/537 deg C 210 (Siemens) 1985

    6. 1984-93 170 ata, 537/537 deg C 500 1980

    7 1994 + 170 ata, 537/537 deg C 500 1945

    8. 2001 246 ata. 537/566 deg C 660 1900

  • 8/6/2019 Presentation on Power Markets

    9/24

    SC/USC Technology

  • 8/6/2019 Presentation on Power Markets

    10/24

    Cost Benefit Analysisy In SC/USC Plants Higher efficiency (about 1% Cycle Efficiency / 3%

    reduction of SHR) resulting iny Fuel Savingsy Lower Aux. Power

    y Reduced CO2, Lower SOx/NOxy Smaller Boiler /Feed Pump

    y Higher capital cost due toy Enhanced metallurgy of boiler & Turbiney Better control systems required to handle higher pressure & temperaturey Technology cost

    y Trade off lies aty Better efficiency (important for an expensive fuel mix)y Reduced ash handling costs & space requirement of BTGy Lower variable cost i.e. lower MC (important for trading)y Reliability of supplier over life of asset

  • 8/6/2019 Presentation on Power Markets

    11/24

    Cost Benefit Analysisy In SC/USC Plants Higher efficiency (about 1% Cycle Efficiency / 3%

    reduction of SHR) resulting iny Fuel Savingsy Lower Aux. Power

    y Reduced CO2, Lower SOx/NOxy Smaller Boiler /Feed Pump

    y Higher capital cost due toy Enhanced metallurgy of boiler & Turbiney Better control systems required to handle higher pressure & temperaturey Technology cost

    y Trade off lies aty Better efficiency (important for an expensive fuel mix)y Reduced ash handling costs & space requirement of BTGy Lower variable cost i.e. lower MC (important for trading)y Reliability of supplier over life of asset

  • 8/6/2019 Presentation on Power Markets

    12/24

    Power Trading

    y Demand Management

    y Need & evolution

    yMechanism

    y Regulatory Framework

    y Why Power Exchanges

  • 8/6/2019 Presentation on Power Markets

    13/24

    BASE LOAD

    BASE LOAD

    Load Curve and Demand Management

    Base Load Managed through Long Term PPAs Nuclear & Large Thermal

    Seasonal Variations Managed through Short Term trades, by

    1) Traders, 2) Bilateral Contracts or 3) Banking Arrangements

    Daily Variations Managed through

    1)Day ahead Power Exchange or 2) UI Balancing

  • 8/6/2019 Presentation on Power Markets

    14/24

    Transaction Structure

    y Largely tied-up through PPAs

    y More than 40 licensed traders in existence now; Largest 5 haveabout 85% of transaction volumes

    y Low liquidity in short term markety

    Insufficient power left for shortterm trade

    y Non-standardization of electricity

    trading products

    y PXs need to compete with OTC as

    well as the peculiar real time

    balancing mechanism

  • 8/6/2019 Presentation on Power Markets

    15/24

    Need & Evolutiony Natural monopoly of transmission system - trading is an artificial market

    y Started in response to apparent under utilisation of generation capacitiesacross regions in 2001

    y

    Allowed in the absence of any specific transmission Open Access frameworky Provided for adequate flexibility in terms of transaction including freedom in

    nomination of buyers and sellers for a transaction

    Included in the EA 2003 as a licensed activityy Done under the frame work of Short Term Open Access rules

    y

    Restricts each transaction to an identified pair of buyer-seller through specificnotional path

    y Currently Trading margin capped at 4paise/unit. Power to Fix trading marginwas enshrined in EA 2003

    y Traders expand profit by putting clause at 2% rebate on timely payment.

    y Trading accounts for about 5% of total energy consumption in India now

  • 8/6/2019 Presentation on Power Markets

    16/24

    Evolution post reforms

  • 8/6/2019 Presentation on Power Markets

    17/24

    yBilateral contracts:ymutual contracts where buyers and sellers search and negotiate long term andshort termyLarge search costs & information asymmetry as compared to trading

    yEA 2003, NEP and various regulatory measures intended towardsyCreating a competitive power marketyIncreasing the number of participants in the sector

    yIncreasing the quantity of electricity under tradeyHowever, issues persist

    ySystem congestion : Transfer capability Reliability margin; computation ofcongestion chargesy

    Complicated operational requirements for scheduling and despatchyComplicated Open Access requirementsyNon-standardized individual contracts for all types of transactions

    yPrice and volume information asymmetry

    yPower Exchanges as market infrastructure to resolve above issues

  • 8/6/2019 Presentation on Power Markets

    18/24

    Exampley Type of Market Day Aheady Trading System PXIy Trading Methodology Closed bid double sided Auction through linear interpolation

    y Auction Timings 10.00 am to 12.00 noon (Day D)y No. of contracts per day 24 hourly contracts for next day delivery (Day D+1)y Minimum Bid Volume 1 MWy Minimum Volume Quotation Step 1 MWy Minimum Value Quotation Step Rs. 10 per MWh

    y Delivery Point Periphery of Regional Transmission System in which the grid-connected exchange entity, is located

    y Transmission charges

    y 1.RegionalTransmissionSystem:AsPer CERC (Open Access inter-StateTransmission)Regulations,2008.

    y 2.StateTransmissionSystem:Aspertheconcerned SERCsRegulations/CERC(Open access)Regulations,2008.

    y Transmission Losses Payable in kind from delivery point to its grid connection point.

    y Settlement Price(s) The Market Clearing prices of the respective Bid Zones

  • 8/6/2019 Presentation on Power Markets

    19/24

    TRADE-CLEARING PRICE & VOLUMESellers Qty Price Agg.

    SupplyBuyers Qty Price Agg.

    Demand

    S1 50 2.5 50 B1 200 5 200

    S2 150 3 200 B2 50 4.5 250

    S3 200 4.5 400 B3 100 4 350S4 150 5 550 B4 200 3 550

    S5 300 6 850 B5 400 2.5 950

  • 8/6/2019 Presentation on Power Markets

    20/24

    Market Clearing mechanism

  • 8/6/2019 Presentation on Power Markets

    21/24

    Other Power Markets

    y Nord Pool, Nordic Power Exchange, world's 1st

    y national transmission system operators (TSOs) areresponsible for reliability and balance settlements

    y Trades with neighboring countries; Norway, Sweden,Denmark, Finland

    y dominated by hydropower (need to sell surplus)

    y transmission system linking all 4 provides the basis for

    physical electricity exchanges

  • 8/6/2019 Presentation on Power Markets

    22/24

    Investors Perspectivey Ability to trade

    y Prime mover :

    y Coal based: CFBC, PC, Supercritical boilers

    y Gas based: Open cycle, Combined cycle

    y Hydro based: Run of the river, Pumped storage, SEB irrigation/political

    issues

    y Fuel dependence

    y Long term coal linkage Domestic: pit-head, non pit-head

    y Domestic Vs Imported fuely Location of plant

    y Proximity to load centers, grid separation

    y Proximity to HVDC links: transmission bottlenecks

  • 8/6/2019 Presentation on Power Markets

    23/24

    Market perspective

    y Large percentage long term tie up: fixed cost recovery,

    Marginal cost pricing

    y Past reneges on PPA by IPPs drive down consumer faith

    y Equity participation by power trader enhances marketability

    Regulatory issues

    Use of Section 62 1(a) of EA 2003 by State ERCs to cap prices

    for reasons of reasonable prices

  • 8/6/2019 Presentation on Power Markets

    24/24

    Thank you