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					</table><p>The Indian Energy Exchange (<a href="https://www.iexindia.com/" target="_blank" rel="noopener">IEX</a>) traded 298 million units (MU) of green energy during February 2024, a 12.61% year-over-year (YoY) drop from 341 MU.</p>
<p>The green energy trade was up by 26.27% from 236 MU <a href="https://www.mercomindia.com/iex-renewable-energy-certificates-january" target="_blank" rel="noopener">traded</a> in January 2024.</p>
<p>The Green Day-Ahead Market (G-DAM) achieved 266 MU, up by 6.4% YoY and 26.67% month-over-month (MoM). The weighted average price discovered in the segment was ₹5.5 (~$0.066)/kWh, with participation from 214 market entities during the month.</p>
<p>The Green Term-Ahead Market (G-TAM) traded 32 MU in February, down by 64.84% YoY and up by 23.08% MoM.</p>
<p>During the two Renewable Energy Certificate (REC) trading sessions on February 14 and 28, the Exchange traded a total of 614,000 RECs, equivalent to 614 MU, a 64.17% YoY increase and a 59.61% MoM decline. January 2024 witnessed the highest volume of RECs traded in the current financial year at 1.52 million RECs.</p>
<p>The clearing prices achieved during the two sessions were ₹360 (~$4.35)/REC and ₹347 (~$4.19)/REC.</p>
<p>The power exchanges have started scheduling two REC trading sessions every month, following the Central Electricity Regulatory Commission’s <a href="https://www.mercomindia.com/cerc-allows-fortnightly-trading-rec" target="_blank" rel="noopener">order</a> in October 2023, to implement it on an experimental basis and enhance the REC trading volume.</p>
<p>The next REC trading sessions are scheduled for March 13 and March 27, 2024.</p>
<p>The Exchange achieved an overall trade volume of 9,462 MUs in February, a 15.4% YoY increase.</p>
<p>The country’s energy consumption reached 127.8 BUs, increasing 8.5% YoY, according to the company statement. The recent Ministry of Power amendments to the electricity late payment surcharge rules 2024 <a href="https://www.mercomindia.com/ministry-to-regulate-discoms-failing-to-clear-dues" target="_blank" rel="noopener">mandate</a> the sale of un-requisitioned surplus power on exchanges, failing which the generating companies will receive reduced fixed charges as a penalty. The amendments are expected to improve the sell-side liquidity on the Exchange and provide competitive price discovery.</p>
<p>The Day-Ahead Market (DAM) segment achieved a volume of 4,722 MU in February 2024, as compared to 4,664 MU a year ago. The Market Clearing Price in DAM during the month was ₹4.93 (~$0.060)/kWh, down approximately 26% year-on-year, due to increased sell liquidity.</p>
<p>The Real-Time Electricity Market (RTM) volume surged by 36.5% to 2,340 MU from 1,714 MU during the same month last year.</p>
<p>The sell bids on the exchange Day Ahead Market plus Real-Time Market during the month increased by 47% YoY.</p>
<p>The Day-Ahead Contingency and Term-Ahead Market (TAM), comprising of contingency, daily &amp; weekly, and monthly contracts up to three months, traded 1,487 MU during the month, higher by 55.9% YoY.</p>
<p>In a recent suo motu order, the CERC <a href="https://www.mercomindia.com/no-manual-bids-strict-trading-hours-cerc-power-exchanges" target="_blank" rel="noopener">ordered</a> a comprehensive audit of all three power exchanges in the next six months and the elimination of manual entries of bids and cancellation/modification of bids outside of trading hours, citing multiple violations.</p>


IEX Trades 298 MU Green Energy in February, REC Volume Falls 60% MoM


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					</table><p>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) has directed all power exchanges to redesign their bidding software to allow members to quote prices within a specified range for different types of contracts.</p>
<p>The Commission said that redesigning the bidding software would reduce the cost of power for buyers while also providing an opportunity for high-cost generators and willing buyers to participate in the High Price Day Ahead Market (HP-DAM) market.</p>
<p>The Power Exchanges are directed to comply with these directions within two days from the order date.</p>
<p>The range for all contracts, including Day Ahead Market (DAM), Green Day Ahead Market (GDAM), Real-Time Market (RTM), Intra-day, Day Ahead Contingency, and Term-Ahead contracts including Green Term Ahead is up to ₹12 (~$0.15)/kWh.</p>
<p>It is up to ₹20 (~$0.24)/kWh for HP-DAM.</p>
<p>The Commission had <a href="https://mercomindia.com/cerc-orders-power-exchanges/" target="_blank" rel="noopener">passed</a> an order, valid until June 30, 2022, directing the power exchanges to redesign their software so that members could quote a price of up to ₹12 (~$0.15)/kWh. An extension was given from July 1, 2022, to September 30, 2022, and later <a href="https://mercomindia.com/market-clearing-price-%e2%82%b912-kwh-exchanges-until-december-end/" target="_blank" rel="noopener">extended</a> to December 31, 2022.</p>
<p>The Commission has been reviewing the situation in the power market and other factors impacting the demand and supply of electricity in the country.</p>
<p>Based on the analysis of data for the past three months, the Commission observed that the Market Clearing Price (MCP) for electricity in the Day-Ahead Market (DAM) ranged up to ₹12 (~$0.15)/kWh. The percentage of blocks in a day with MCP at 12 (~$0.15)/kWh was in the range of 0-33% in March 2023.</p>
<p>The peak demand for electricity touched 212 GW in January 2023 and 210 GW in February 2023, showing an increase of 8% compared to the same period last year.</p>
<p>The Peak Demand is expected to increase further with the onset of summer and increase in manufacturing activities from April onwards, as per a report published by Central Electricity Authority.</p>
<p>The Commission also noted that natural gas and coal prices have significantly reduced over the last few months.</p>
<p>The sellers bidding in the range of ₹8 (~$0.097)- ₹12 (~$0.15)/kWh are mostly state utilities and independent power producers based on imported coal and e-auction coal, and the average bid price of such sellers has generally been lower than ₹10 (~$0.12)/kWh.</p>
<p>However, during peak hours, MCP touches the price ceiling of ₹12 (~$0.15)/kWh largely because of buyers bidding at the ceiling price due to higher demand.</p>
<p>The Commission approved the introduction of HP-DAM in the Integrated Day Ahead Market (I-DAM) segment at IEX and approved the price ceiling of ₹50 (~$0.61)/kWh. However, there has not been any trade in this segment since its introduction.</p>
<p>Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.</p>


CERC Orders Changes in Power Exchanges’ Bidding Software to Cut Power Cost


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					</table><p>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) passed a suo motu order retaining the ₹12 (~$0.14)/kWh price cap on power exchanges till further notice to ensure that prices didn’t rise disproportionately as a result of the increasing lighting and heating needs along with industrial activity in the north and northwestern India due to intense cold weather.</p>
<p>The order said that all power exchanges would allow the price cap to operate in the Day-Ahead Market (DAM), including the Green Day-Ahead Market (GDAM), Real-Time Market (RTM), Intraday, Day-Ahead Contingency, and Term-Ahead Contracts, until further notice.</p>
<p><strong>Background </strong></p>
<p>The Commission had <a href="https://mercomindia.com/cerc-orders-power-exchanges/" target="_blank" rel="noopener">passed</a> an order, which was valid until June 30, 2022, directing the power exchanges to redesign their software so that members could quote a price in the range of ₹0/kWh to ₹12 (~$0.14)/kWh.</p>
<p>An extension was given from July 1, 2022, to September 30, 2022, and later <a href="https://mercomindia.com/market-clearing-price-%e2%82%b912-kwh-exchanges-until-december-end/" target="_blank" rel="noopener">extended</a> to December 31, 2022.</p>
<p><strong>Commission&#8217;s analysis</strong></p>
<p>It observed that in DAM on the Indian Energy Exchange (IEX), the market clearing price of ₹12 (~$0.14)/kWh was discovered from 1800 hrs to 2000 hrs in October and November. Until December 26, 2022, the maximum market clearing price was observed between 1630 hrs and 1945 hrs, as well as the morning peak of 0700 hrs to 0945 hrs.</p>
<p>The Commission noted that these peaks would become steeper as cold weather intensifies in north and northwestern India.</p>
<p>The last few days of December saw a steep increase, with 23 blocks touching the maximum price of ₹12 (~$0.14)/kWh on December 26. A similar trend was also observed in the RTM on IEX.</p>
<p>According to an analysis of data from the past few years by the Central Electricity Regulatory Commission (CERC), energy demand and peak demand remained higher in FY 2022-23. This trend is expected to continue in the coming months.</p>
<p>The peak demand reached 187 GW in October and November 2022. However, it increased in December and touched 200 GW on December 23.</p>
<p>CERC said that the domestic coal stock level from October 2022 to December 2022 remained well-positioned compared to the same period last year. However, hydro and wind generation came down from October, which is likely to exert pressure on existing thermal stocks.</p>
<p>Accordingly, the Commission directed the power exchanges to continue to operate their software until further orders so that members could quote a price with a cap of ₹12 (~$0.14)/kWh.</p>
<p>The GDAM <a href="https://mercomindia.com/renewable-energy-trading-at-iex-12-weighted-average-price-rebounds/" target="_blank" rel="noopener">traded</a> 288 MU volume in November with a weighted average price of ₹4.31 ($0.053)/ kWh, up 7.2% MoM. The market saw participation from 178 entities during the month, with the highest number of participants in a single day at 125.</p>
<p>The GTAM traded 66 MU volume during the month. The average monthly price for solar was ₹5.01 ($0.061)/ kWh, up 33%; for non-solar, it stood at ₹5.66 ($0.069)/kWh, up 3.9% MoM.</p>
<p>Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don&#8217;t miss any critical updates from the renewable industry.</p>


CERC Retains Market Clearing Price Cap of ₹12/kWh in Exchanges for Now


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					</table><p>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) has issued a discussion paper on pricing methodology in the power trading market in the wake of price spikes and unprecedented demand in the last year.</p>
<p>The Commission has invited suggestions from all the stakeholders.</p>
<p>The volume of electricity transacted through the power exchanges has increased significantly over the years. Though the overall demand-supply situation in the power sector generally gets reflected in the prices discovered through the power exchanges, some price spikes were witnessed in October 2021.</p>
<p>In March 2022, an unprecedented demand was observed without the increase in supply, and the prices in both the Day-Ahead Market (DAM) and the Real-Time Market (RTM) remained significantly higher for a consistent period, which led to regulatory intervention.</p>
<p><strong>Short-term power market </strong></p>
<p>According to the discussion paper, power supply in India is predominantly tied up in long-term contracts. With 87%, long-term transactions dominate the share of total electricity transactions in the country.</p>
<p style="text-align: center;"><a href="https://mercomindia.com/wp-content/uploads/2022/10/CERC-1.png"><img loading="lazy" decoding="async" class="alignnone wp-image-43042 size-full" src="https://mercomindia.com/wp-content/uploads/2022/10/CERC-1.png" alt="CERC-1" width="550" height="286" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/CERC-1.png 550w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/CERC-1-300x156.png 300w" sizes="(max-width: 550px) 100vw, 550px" /></a></p>
<p>Of the total short-term transactions, the volume transacted through the power exchanges was the highest at 54%, followed by bilateral transactions through traders at 21%, transactions through DSM at 14%, and bilateral transactions between distribution companies (DISCOMs) at 11%.</p>
<p>Most of the volume transacted through the exchanges is being transacted in the DAM (including G-DAM), followed by RTM and Term-Ahead Market (TAM).</p>
<p><strong>Over-the-counter market</strong></p>
<p>The discussion paper refers to the over-the-counter (OTC) market as a key avenue for electricity trading. The Commission made provisions for an OTC platform in the CERC Power Market Regulations 2021. The objectives of the OTC platform are to:</p>
<ul>
<li>Provide a platform with the information of potential buyers and sellers of electricity</li>
<li>Maintain a repository of data of buyers and sellers and provide such data to participants</li>
<li>Provide such services as advanced data analysis tools to market participants.</li>
</ul>
<p><strong>Pricing principles at power exchanges</strong></p>
<p>Three power exchanges are operating in India. While the Indian Energy Exchange (IEX) and Power Exchange India (PXIL) commenced operations in 2008, the Hindustan Power Exchange (HPX) started operating in July 2022.</p>
<p>Based on the pricing principle, the contracts are broadly categorized into two types:</p>
<ul>
<li><strong>Collective Transactions: </strong>The price is discovered through anonymous and simultaneous competitive bidding by the buyers and sellers.</li>
<li><strong>Continuous Transactions: T</strong>he buy and sell bids are matched continuously with price-time priority. For a specific contract, the seller with the minimum quote and the buyer with the maximum quote are considered the best seller and best buyer.</li>
</ul>
<p><strong>Pricing Methodology</strong></p>
<p>The mechanism for collective transactions leads to the discovery of a uniform market clearing price (UMCP).</p>
<p>However, due to a uniform price for all market participants who are cleared, all sellers who bid lower prices get an extra profit (difference between the UMCP and the bid price). Owing to the recent events in the electricity market, with prices reaching alarming levels, concerns have been raised that some sellers are making huge gains due to this market auction design.</p>
<p><strong>Uniform Pricing versus Pay as Bid</strong></p>
<p>The difference between the two lies in the final price paid to the cleared sellers.</p>
<ul>
<li><strong>Uniform Pricing: </strong>All the cleared sellers receive the same price, which is the market clearing price. As observed, the market cleared price is the bid price of the most expensive seller cleared to meet demand.</li>
<li><strong>Pay as Bid:</strong> Prices paid to the cleared sellers are based on the sell bid offered by the respective seller. Each seller is paid a different price tied to the bid offered. These prices do not depend on the price of the most expensive seller.</li>
</ul>
<p><strong>Supply shortage and uniform pricing</strong></p>
<p>The CERC discussion paper says that UMCP is the most commonly adopted pricing methodology globally, but concerns have been raised regarding the efficacy of this market design.</p>
<p>In March 2022, India witnessed a period of demand surge coupled with a supply shortage. On the other hand, the increase in the supply has been limited. The situation has been further aggravated due to geo-political factors affecting the fuel supply and certain domestic supply constraints.</p>
<p>The increased prices of fuel, particularly imported coal, led to a significant increase in the marginal costs of the margin-setting generators of the market. This, along with a surge in demand, led to an abnormally high market clearing price, touching ₹20 (~$0.24)/kWh.</p>
<p><strong>Regulatory intervention</strong></p>
<p>On April 1, 2022, the Commission <a href="https://mercomindia.com/cerc-orders-power-exchanges/" target="_blank" rel="noopener">directed</a> the power exchanges to re-design, with immediate effect, the bidding software so that members can submit their bids in the price range of ₹0/kWh to ₹12 (~$0.15)/kWh for DAM and RTM.</p>
<p>As a result of setting the ceiling price at ₹12 (~$0.15)/kWh for DAM and RTM, the market clearing price in DAM and RTM was frequently hitting the ceiling price with the volume of buy bids greater than the volume of sell bids.</p>
<p>The Commission felt the need for a uniform price ceiling in all segments so that there was no shift in supply volume from one segment of the power exchanges to another segment induced by differential ceiling prices in the market segments. On May 6, 2022, the Commission directed the power exchanges to revise the ceiling price of all segments to ₹12 (~$0.15)/kWh.</p>
<p>CERC, in its discussion paper, states that intervention in the market is justified when the price spike results from market power or misuse of market position by suppliers.</p>
<p>However, if the price rise is caused by demand behavior, there is a need to correct the demand side and not further scuttle the supply side.</p>
<p>The other school of thought believes India cannot afford very high price caps or the standard scarcity pricing framework.</p>
<p>While the imposition of a price cap ensures that the market prices remain reasonable and within bounds, the generators with variable costs higher than the price cap tend to go out of the market. Different countries have proposed segmenting the market to attract more supply.</p>
<p>In August this year, CERC <a href="https://mercomindia.com/power-exchanges-allowed-time-clearing-settlement-mechanism/" target="_blank" rel="noopener">granted</a> time for one more year from August 15, 2022, for power exchanges to align their clearing and settlement system to the Payment and Settlement Systems Act (PSSA) 2007.</p>


CERC to Evaluate Pricing Methodology in Power Exchanges, Invites Stakeholder Comments


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					</table><p>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/" target="_blank" rel="noopener">CERC</a>) has ruled that the power exchanges should continue to allow members to quote a price in the range of ₹0/kWh to ₹12(~$0.15)/kWh in the Day-Ahead Market (including Green Day-Ahead Market), Real-Time Market, Day-Ahead Contingency, and Term-Ahead (including Green Term-Ahead Market) contracts from October 1, 2022, to December 31, 2022.</p>
<p>The Commission gave the direction after reviewing the situation in the power market and other related factors impacting the demand and supply of electricity.</p>
<p><strong>Background</strong></p>
<p>In April this year, CERC <a href="https://mercomindia.com/cerc-orders-power-exchanges/" target="_blank" rel="noopener">directed</a> the power exchanges to re-design their bidding software so that members can submit their buy bids at the maximum price of ₹12 (~$0.15)/kWh for the Day-Ahead and Real-Time markets.</p>
<p>The order was applicable until June 30, 2022. Later the validity of the order was extended for three months until September 30, 2022.</p>
<p><strong>Commission’s analysis</strong></p>
<p>Based on the data provided by power exchanges, the Power System Operation Corporation (POSOCO), and the Central Electricity Authority, the Commission noted that the peak demand fluctuated and touched 199 GW on September 7, 2022. Based on past trends, it would remain significant in the winter months.</p>
<p>Also, during the last three months, the market clearing price of ₹12 (~$0.15)/kWh in the Day-Ahead Market had generally been discovered during the evening hours from 18:30 hrs.</p>
<p>From September 15, 2022, morning and evening peaks in the market clearing price were observed in the Day-Ahead Market at IEX. It is expected that these peaks are anticipated to become steeper during the winter season.</p>
<p>The Commission said high demand for electricity, particularly from household and industrial consumers, was likely to continue over the next few months mainly due to the festive season and pressure emanating from lighting and heating load.</p>
<p>CERC noted that the domestic coal stock was well-positioned compared to October-December 2021. However, it is expected that generation from hydro and wind would start decreasing from October onwards, which would exert pressure on coal stock.</p>
<p>After analyzing the market trends and to protect consumer interests, the Commission decided to extend the validity of the earlier order until December 31, 2022.</p>
<p>The Green Day-Ahead Market <a href="https://mercomindia.com/renewable-energy-trading-iex-down-35-mom-august/" target="_blank" rel="noopener">traded</a> 321 MU in August with a weighted average price of ₹5.20 (~$0.065)/kWh. In all, 157 entities participated in the process. The highest number of participants in a single day was 114 on August 10, 2022.</p>
<p>Last month, CERC <a href="https://mercomindia.com/power-exchanges-allowed-time-clearing-settlement-mechanism/" target="_blank" rel="noopener">granted</a> time for one more year from August 15, 2022, for power exchanges to align their clearing and settlement system to the Payment and Settlement Systems Act 2007.</p>
<p>Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.</p>


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