CERC Approves Introduction of Green Day Ahead Contracts on Energy Exchanges

The Central Electricity Regulatory Commission (CERC), in a recent order, approved the introduction of the Green Day Ahead Contract (GDAC) at the Indian Energy Exchange (IEX) and the Power Exchange India (PXIL) in the Integrated Day Ahead Market (IDAM) in a restricted manner.

The Commission directed the petitioner to incorporate the provisions in its business rules concerning the introduction of Green Day Ahead Contracts and submit it for approval within two weeks from the date of the order.

IEX and PXIL had filed petitions for approval to introduce Green Day Ahead Contracts in the Day-Ahead Market (DAM) on their platforms. Green Day Ahead Contracts provide added opportunities for generators to sell renewable energy and help the obligated entities fulfill their renewable purchase obligation (RPO).

Background

IEX and PXIL proposed that the conventional and renewable energy segment participants submit their bids in two parts – the quantity they would be willing to buy or sell as renewable or conventional power.

Both the power exchanges, in their submissions, proposed that in addition to the existing Day Ahead Contract in Day-Ahead Market, an additional Green Day Ahead Contract will be available for allowing exclusive trade of renewable energy.

The petitioners said that the market-clearing must be sequential – first, the Green Day Ahead Contract will be cleared, followed by the Day Ahead Contract.

Sequential requests will be made to the national load despatch center (NLDC) to allocate a transmission corridor for the two contracts.

A detailed statement will be issued to buyers for RPO credit specifying the total quantity and proportion of renewable energy purchased.

Also, depending upon the bidders’ choice, uncleared bid quantities from the renewable segment can be transferred to the conventional segment.

The petitioners added that for renewable energy certificate (REC) issuance to sellers cleared in the Day-Ahead Contract, a detailed statement would be issued to sellers specifying the total quantity and type of renewable energy sold by the seller.

Eligibility for Green Day Ahead Contract

  • Sellers: Renewable Energy generators having no objection certificate issued by load despatch center specifying maximum quantity and type of renewable energy will be eligible to trade
  • Buyers: All the entities which are eligible to procure power through open access will be eligible to participate in Green Day Ahead Contract as buyers
  • Entities will be eligible to participate in Green Day Ahead Contract based on the same no objection certificate issued for Day-Ahead Market by the load despatch center

The proposed timeline for Green Day Ahead Contract is given below:

GDAC 2

The petitioners contended that Green Day Ahead Contract would enable the obligated entities to procure renewable power at competitive prices on a day-ahead basis and help meet their RPO.

They said that Green Day Ahead Contract would help promote the trading of renewable energy through the market. Green Day Ahead Contracts have inherent benefits, including enhanced competition, efficient price discovery, flexible participation, payment security mechanism, and mitigate the risk of buyers and sellers entering long-term PPAs.

Commission’s analysis

The Commission observed that the proposal of the petitioners to introduce the Green Day Ahead Contract on their power exchange platforms was worthy of consideration. The Commission noted that the petitioners had agreed to introduce Green Day Ahead Contract within the existing regulatory framework without insisting on amendments to regulations.

Bidding, market clearing, and scheduling

The Commission observed that the petitioners had proposed first to clear Green Day Ahead Contracts and then clear Day Ahead Contracts. Further, some of the stakeholders had suggested a separate window for bidding GDAC and DAC or reopening the bidding window for DAC after clearing GDAC.

Therefore, there will be a single window for bidding per the existing timeline of 10 AM to 12 noon. Market Clearing should be sequential – first, GDAC will be cleared followed by DAC considering the uncleared bids of GDAC, if any.

Scheduling of collective transactions

The Commission noted that the timelines for collective transactions were specified in the procedures. The timeframe for the auction window for GDAC and DAC was the same, and also power exchanges had to make combined requests to NLDC.

The Commission stated that in the event of real-time transmission constraint, curtailment of transmission would be per the provisions of the Grid Code.

Market coupling

The central regulator said that the petitioners had recommended the coupling of power exchanges to ensure further depth and spread of the market by allowing participants in different exchanges to avail the benefits of multi-exchange requirements with the formation of a single price in the Integrated Day Ahead Market.

“However, the market coupling may be considered in the near future to avoid multiple price formations. Accordingly, the Commission holds that the proposal of market coupling for IDAM cannot be allowed through the present petition,” the Commission added.

RPO fulfillment through GDAC

The regulator added that the buyers might be given the flexibility to choose the RPO they wish to fulfill from the power procured from GDAC.

Portfolio of renewable energy sale by DISCOMs through GDAC

Any DISCOM transacting through a portfolio should ensure that while transacting on the renewable energy segment of IDAM, the source of generation (solar or non-solar or hydro) should be indicated in the no-objection certificate.

Issuance of renewable power sold under GDAC

The petitioner had submitted that the present REC framework needed to be amended to enable all renewable generators to sell power under GDAC. The Commission made it clear that in line with GTAM, participation in GDAC will be restricted to only those renewable generators that are not registered under the REC mechanism, and sale of power by such generators in DAC would not be eligible for issuance of RECs.

Waiver of ISTS charges in GDAC

Some stakeholders had requested to amend the sharing regulations to provide for waiver of interstate transmission system (ISTS) charges in GDAC. The Commission added that the waiver of ISTS charges and losses would be governed as per the provision of the sharing regulations.

Management of variations by renewable generators

Some stakeholders suggested that the renewable energy sellers buy from Real-Time Market (RTM) to manage variations. However, their purchase from RTM should not be used to meet the RPO compliance of the obligated entities. The Commission said that the proposal seeking flexibility to renewable generators to buy from RTM to meet supply obligation under GDAC was beyond the scope of the petition.

After considering all the facts, the Commission approved the proposal to introduce GDAC in a restricted manner subject to compliance with the orders’ directions.

IEX traded 1.68 billion units of renewable energy in the third quarter of the calendar year 2021. The exchange traded 8.99 BU of energy during September, with a 59% YoY growth, across all market segments. In Q3, the market traded a volume of 25.86 BU, a 57% growth across market segments compared to the same quarter last year.

Last December, IEX launched green daily and green weekly contracts on its green market trading platform.

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