Green Day Ahead Market is Facilitating Electricity Purchase On A Day-Ahead Basis

The Indian Energy Exchange (IEX) and the Power Exchange India (PXIL) introduced the Green Day Ahead Market (GDAM) in October 2021, a market segment that enables participants to purchase electricity on a day-ahead basis.

The intent of introducing GDAM was to provide additional sales avenues to existing renewable power projects that are either facing payment risk with the distribution companies under the existing power purchase agreements (PPAs) or have surplus energy.

A double-sided closed auction bidding process determines the prices and quantity of electricity traded.

As multiple buyers and sellers participate in GDAM, the principle of collective transactions leads to efficient price discovery and provides appropriate pricing signals to the renewable energy sector. GDAM enables the obligated entities to procure renewable power at competitive prices on a day-ahead basis and help meet their renewable purchase obligation (RPO) targets.

Before introducing GDAM, renewable power was procured through the green term–ahead market (GTAM), wherein if an entity fails to purchase the electricity in the bidding process, they will have to wait for another week to bid again. However, GDAM allows an entity to participate in bids every day, thus offering more flexibility to procure power.

ISTS charges have also been waived off for trading electricity through the GDAM.

The launch of the green day-ahead market has helped deepen the green market and provide competitive price signals, besides offering the opportunity to trade in green energy in the most transparent, flexible, competitive, and efficient way.

The distribution companies can also sell surplus renewable power generated in their area. While, distribution licensee, open access consumers, and captive power consumers can meet the RPO target by directly buying green power from the power exchanges. The non-obligated entities can buy power voluntarily and help increase the share of green power.

The introduction of GDAM is expected to create a domino effect that will lead to a gradual shift from PPA-based contracts to market-based models, which will build and develop the markets to the next level.

Monthly Volume and Price of Electricity in G-DAM

GDAM saw participation by 56 entities trading 24.8 million units in October, the first month of trading for the market segment. According to the latest figures, GDAM traded 191 MU of energy with the weighted average price of ₹4.78 (~$0.063)/kWh. In February 2022, 188 participants took part in the trading, and the amount of power traded through GDAM has seen a phased increase.

Renewable Energy Certificates (REC)

IEX resumed trading renewable energy certificates (REC) in November 2021. The last REC trading session was in June 2020. The exchange saw applications of over 800 participants who waited for over 16 months for RECs to resume to meet their RPO and voluntary renewable power obligations.

A total of 2.44 million RECs were traded during November, including 2.19 million non-solar RECs and 253,000 solar RECs. The exchange discovered a price of ₹2,000 (~$26.52) per certificate for solar RECs and ₹1,000 (~$13.26) per certificate for non-solar RECs.

Since the trading resumed, IEX has traded 5,566,452 RECs, including 4,697,786 non-solar RECs and 868,666 solar RECs.

Renewable Energy Certificates are the green attributes that allow entities to offset their carbon footprints without investing capital into generation capacities. One REC is created when one megawatt-hour of electricity is generated from an eligible renewable energy source, i.e., one REC is equivalent to 1MWh or renewable energy.

The recently published Mercom India Solar Open Access Market Report Q4 & Annual 2021 reported record growth of 222% year-over-year in open access installations in 2021. The report provides a detailed analysis of trading markets and their impact on the sector.