The Ministry of Power (MoP) has released the framework for implementing the Market-Based Economic Dispatch (MBED) – Phase 1 program to reduce consumers’ power purchase costs by 5%.

MBED will ensure that the cheapest generating resources across the country are dispatched to meet the overall system demand. The ministry said it would be a win-win situation for both the distribution companies (DISCOMs) and the generators, resulting in significant savings for electricity consumers.

The power demand by all states is proposed to be met through a central pool allocating power at the optimal price. Currently, DISCOMs have been sourcing power from available sources within the states, invariably ending with a higher energy cost.

The implementation of MBED – Phase 1 is expected to begin from April 1, 2022. The Central Electricity Regulatory Commission (CERC) will conduct trial runs to ensure the system runs smoothly. Interstate generation facilities will participate in the first phase, while other generation facilities can join voluntarily.

The ministry said that the time is right for optimizing generating facilities to deliver benefits of reduced operating costs to distribution utilities and end consumers. With substantial generation capacity additions over the past few years, a robust day-ahead market will also form the basis for transitioning away from the country’s over-dependence on longer-term power purchase agreements to sustainable market-based operations.

Implementing MBED in the day-ahead horizon is an essential step in reforming electricity market operations and moving towards ‘One Nation, One Grid, One Frequency, One Price.’

In June 2021, the ministry issued a discussion paper on MBED for stakeholders to submit their feedback.  In July, it also organized a consultation workshop with state governments and DISCOMs, regulatory commissions, and state power generating companies in August.

Considering total power generation of 1,393 billion units in the country with a weighted average power price of ₹2.36 ($0.032)/kWh, the savings from the proposed mechanism would be 3.74%, amounting to ₹122.95 billion ($1.69 billion), the ministry had then said.

Mercom had earlier reported that the ministry had decided to set up an integrated day-ahead market (DAM) at the power exchanges with different price formations for power generated from renewable energy and conventional power.