The Ministry of Power (MoP) has decided to set up an integrated day-ahead market (DAM) at the power exchanges with separate price formation for power generated from renewable energy and conventional power.

According to the MoP notification, the introduction of the green term ahead market at the power exchanges was a significant milestone, which helps accomplish green targets while supporting efficient and transparent integration of green energy.

The trading in the Green Term-Ahead Market commenced on August 21, 2020, at the Indian Energy Exchange and traded a volume of 51 MU during March 2021.

As India has set a target of 175 GW of renewable power by 2022, which would be raised to 450 GW by 2030, it is imperative to meet the challenges such as the need for a stronger electricity grid while maintaining a perfect balance of demand and supply.

Long-term power purchase agreements (PPAs) are replaced by the medium-term, short-term, day ahead, intraday, and real-time markets where the day is divided into 96-time-blocks of 15-minutes each. Efforts are underway to fine-tune the blocks to five minutes, as the measure ensures a higher accuracy of predictability.

As of now, the electricity volume traded at power exchanges makes up for 5.5% of the total energy consumption in the grid. Renewable energy certificate (REC) markets at the exchange facilitate the sale of RECs to obligated entities to meet their renewable purchase obligation (RPO).

The MoP decided to launch the integrated DAM to offer multiple options for market participants in renewable energy, which will be competing against each other. According to the notification, the DAM should be ideally launched by June 30, 2021.

The MoP listed the following benefits of renewable energy trade through power exchanges:

• Signaling investment for the sector
• Ensuring payment to generators
• Unlocking untapped renewable energy potential
• Option to meet RPO at any time from the market
• Reduction in curtailment of power
• Mitigating DISCOMs’ price risk in purchasing long-term PPAs

According to the notification, the proposed market structure should allow the buyer to meet the RPO target by directly buying green power from the exchange.

There will be a separate (G-DAM) green-day ahead market before the current day-ahead market along with separate products for different types of renewables.

Participants can submit their bids in two parts, the quantity they are willing to trade in renewable or conventional. Sellers will be allowed to sell under the renewable energy segment only if they are pre-certified through a procedure like the REC market certification process.

The notification adds that to avoid multiple prices from different exchanges for renewable and conventional energy, coupling of exchanges should be adopted.

Meanwhile, as the power market awaits the end of an over seven-month halt in the trading of REC, stakeholders remain hopeful of a deadline extension from their respective state electricity regulatory commissions to meet their RPO targets.

The Appellate Tribunal for Electricity (APTEL) had ordered a halt on the trade of RECs against a petition filed by the Green Energy Association against the Central Electricity Regulatory Commission on July 24, 2020. Following this, RECs have not been traded on the country’s power exchanges.