Buyers Lap Up Solar and Green Power from Indian Energy Exchange’s New Trading Platform

Solar power is trading at premiums ranging between ₹0.40 (~$ 0.0054)/kWh and ₹0.60 (~$0.0082)/kWh on the Indian Energy Exchange’s (IEX) recently launched renewable energy platform, an executive told Mercom.

“IEX launched its green energy power trading platform a little over three weeks ago, and prices are following a pattern similar to conventional power traded at the day-ahead-market – the platform for trading coal-fired and other forms of conventional power,” said Rohit Bajaj, head- business development at IEX.

Last week, prices at the day-ahead-market selling conventional power inched up by almost ₹0.40 (~$0.0054)/kWh. In tandem, green prices also jumped from ₹3.40 (~$0.046)/kWh to ₹3.81 (~$0.052) /kWh.

“We are witnessing robust demand for green power, and the entire quantity on offer is allocated daily.” Said Bajaj.

Over the last three weeks, IEX traded close to 6.5 million units of green power. Amplus power was the first seller to join the platform. Its entire offer from a 150 MW solar power project has been sold since the first day of trading. Amplus’s generation facilities are expected to produce a total of 1,1890 million units of electricity over their 25 years lifeline.

It was followed by Karnataka state utility, entering the market with 100-150 MW of sale offers in a few time slots between 12 noon and 2 pm.

States generating surplus renewable power, including Karnataka, Tamil Nadu, Andhra Pradesh and Telangana, are in the process of joining the platform for selling their excess energy. IEX executives believe they would initiate selling in the next few weeks.

“IEX is also receiving inquiries from small and mini hydel plants, the power from which can be bought to fulfill non-solar Renewable Power Purchase Obligations (RPO),” said Bajaj.

On the buy-side, IEX is heavily betting on state utilities requiring green power to fulfill their RPO. It has also received buy orders from consumers in the cement and steel sectors.

Recently Mercom reported on the RPO status of states. Karnataka, Rajasthan, Telangana, and Andhra Pradesh have exceeded their RPO targets. On the other hand, about 15 states/union territories have an RPO deficit of 75-100%.

“A few corporates are wanting to buy 100% green power while users with seasonal power demand or increased demand during certain times of the day will find the platform useful. The green platform allows a minimum buy and sale of 220 kW power over 50 minutes slot. For the conventional platform, it is 1 MW.

If buyers purchase from the conventional platform, they need to procure Renewable Energy Certificates (REC) to fulfill their RPO. These certificates are ruling at ₹1 (~$0.014)/kWh. A buyer’s power purchase cost then increases by the same amount. In a recent Central Electricity Regulatory Commission (CERC) order, the forbearance (maximum) price for 2020 was reduced to ₹1,000 (~$13.16) for solar and non-solar RECs, down from 2017’s prices of ₹2,400 (~$31.59)/MWh and ₹3,000 (~$39.48) respectively. The floor price is now zero for both solar and non-solar RECs, compared to ₹1,000 (~$13.16) each previously.

The average green power price discovered on the platform was ₹3.32 (~$0.045)/kWh, and it varied between ₹3 (~$ 0.041)/kWh and ₹3.81 (~$0.052)/kWh over the last three weeks.

“These prices are extremely competitive, much below utilities’ power procurement cost, which is around ₹3.60 (~$0.049)/kWh on an average for the country as a whole,” a power sector executive told Mercom.

During the initial days, solar power was trading at around ₹3 (~$0.041)/kWh, a premium of almost ₹0.40 (~$ 0.0054)/kWh over conventional power prices. Initially, not every seller and buyer was aware of the green platform; however, as awareness grew, so did demand. Its premiums over conventional power prices inched up to ₹0.60 (~$0.0082)/kWh.

“Buyers are likely to be ready to pay premiums over conventional prices as long as the difference is less than ₹1 ( ~$0.014)/kWh – the ruling market price for Renewable Energy Certificates,” said an IEX executive.

“There is no dearth of buyers. They are waiting for a good quantum of power to be offered,” Bajaj said.

IEX is expecting sale participation to rise during the year-end because power producers with long term power sale agreements are allowed to sell excess power during this time. Producers with short terms or monthly power sale agreements are likely to find the platform an attractive sale opportunity too.

Traditionally, there was no differentiation between thermal and renewable power sales on the conventional platform. Buyers interested only in renewable energy could not source green power. With the introduction of this green market, these buyers can now fulfill their green energy requirements.

A different market for conventional and green power paves the way for transparent price discovery of electricity based on generation source. Until now, renewable energy (solar or wind) and thermal were being sold at the same price, while they are produced at different costs.

The new trade, along with the waiver of inter-state transmission fees announced by the power ministry, is also likely to help the growth of the renewable market.