‘Consumerism of power set to become reality’
India’s two power exchanges – Indian Energy Exchange (IEX) and Power Exchange India (PXIL) – launched power trading on a Real-time Market (RTM) basis. Union power minister RK Singh formally inaugurated it on Wednesday, though trading started on Monday. In an interview with Jyoti Mukul & Shreya Jai, RAJIV SRIVASTAVA, MD & CEO, IEX, says the next step should be to move to hybrid trading of conventional and renewable power. Edited excerpts:
How important is it to have Real Time Market in these times?
What Real Time Market (RTM) does is allow people to budget for their fluctuations on a nearly real-time basis since people can buy power within an hour of their requirements. We know fluctuation in the electricity sector happens very fast – every minute it keeps changing. The RTM market allows you to budget for this. So earlier, people used to buy electricity within the same day or the next day but now you have to buy power at least two hours in advance. This is being managed through a deviation settlement mechanism, which means when a buyer needs to increase the requirement, he will just overdraw from the grid. As you overdraw, the regulatory authority imposes a certain amount of penalty on you. Now, with this RTM coming in, there is no need to overdraw, which means your penal provisions will go down significantly. And, you will still continue to get the same level of service or better service for electricity and you can serve your consumer so much better. So, in a way, we do believe that this is a very significant new product that has been launched in the market.
What was the volume of trading in the debut session?
We are witnessing a huge buysell happening on our exchange for this product. Close to 90 participants in the first two days. The prices are extremely attractive and the liquidity is really nice. It supports 24X7 power supply aspiration in a very flexible, efficient and cost effective manner. In the first 48 sessions, our volume was close to 3.4 million units (kilowatt per hour). Every possible power distribution company (discom), open access buyers and independent power producers from across the country have participated. The more open access buyers come in, they see merit in a mechanism like this. We had NTPC, Sembcorp and full range of generators coming and discoms from Andhra Pradesh, Karnataka, Odisha, Delhi, Uttar Pradesh, Assam, Chandigarh, West Bengal, Maharashtra and several others. Large open access consumers, like steel, zinc and iron companies, are coming.
The lockdown has led to a lot of demand going out of the market and fluctuation with demand picking up now. Do you think RTM is a boon in such a scenario?
Anyway, RTM is a boon. When lockdown was announced at the end of March and all of April was in a severe lockdown, we saw peak demand drop by almost 35 per cent and base demand fall by about 25 per cent. During the same time, the exchange saw a drop of only 6.6 per cent. In May, demand dip was 10-15 per cent but we’ve had almost a 50 per cent growth in demand (year-on-year). That’s actually playing out to the goodness of the exchange. When the demand in the country is overall low, but the supply of the exchange is high, the prices come down. When the prices come down, they offer an opportunity to distribution companies and open access consumers to buy more on the exchange and save money on their portfolio. Demand from industrial consumers has started to show up a lot more, even though it isn’t as good as we want it to be.
Can you sell green and conventional power through the same platform?
There is no differentiation between green and brown. We are in discussion with the CERC and the power ministry to set up purely green power trading. The financials of both work differently. Green power comes as 100 per cent power purchase agreement (PPA)based capacity creation versus coal that has 80-85 per cent in the PPA and the remaining is flexible. This is bound to change soon.
How do you foresee power demand for this year?
If May is anything to go by, demand will only go up from here. April and May were months with most subdued industrial activity. We have a lot of industrial consumers who come and buy on the exchange but even in such times, the exchange requirements have gone up by almost 20 per cent in April and May. So, the exchange is running at 20 per cent growth year-on-year while the electricity market is down. Right now, the goodness of the exchange is in the low prices, flexibility to reduce or increase your offtake on an hourly basis, and flexibility to buy as much as you want to support your 24X7 consumers.