Implementation of Real-Time Market (RTM) Paves Way for A More Efficient Electricity Market and Smooth Integration of Renewable Energy

With the launch of RTM on 1st June 2020, electricity distribution companies and generators will gain access to contracts in real time which will help them to optimize their demand supply equation and provide them the opportunity to capitalize the surplus deficit scenario. Establishing RTM is a landmark move by the Central Electricity Regulatory Commission (CERC) and according to estimates by Indian Energy Exchange (IEX) and Power Exchange of India Limited (PXIL), around 20 billion units of power would be traded annually through RTM. A staggering 1.64 million units of power were traded on the platform within a few hours of RTM 's launch on June 1, 2020.

To incorporate the RTM system, CERC amended three regulations (Indian Electricity Grid Code Regulations, Power Market Regulations, and Open Access in Inter-State Transmission Regulations).

Relevance and Impact

Electricity markets in real time are expected to help various stakeholders with reduced volatility and uncertainty due to increased share of renewables in the grid. It is also expected to increase the efficiency of the power purchase portfolio management as:

• Certainty in the sector increases by the introduction of gate closure and faster bidding mechanism
• Enabling access to a larger pool of power generators with surplus reserves
• DISCOMs, like generators, can also sell their un-requisitioned power and gain additional revenue (50% of gains realized)
• DISCOMs can estimate demand more accurately in real time and can fill the gaps created due to demand estimation errors in day ahead scheduling
• Generators can also buy power from the RTM in case of forced outage to fulfill their contractual commitments

Many states operate costly generators to meet demand during system peak hours (within the states) and run these plants at technical minimum during the rest of the day. This results in overall high cost of system operation. Though existing intraday markets provide opportunities to the states to replace such costly generators with cheaper resources in other states, such transactions are rarely observed. It has been estimated that if each state were to replace its costly generation with cheaper resources available (in Real Time) in other states, the total daily power purchase cost of the country would reduce substantially. Liquidity in the RTM will increase because of the design change in the form of auction and gate closure. DISCOMs have developed confidence over the period in the auction method of DAM. Further, strong deterrent against deviation (already initiated by way of amendment to CERC DSM Regulations) would drive the market participants towards organized markets which eventually would increase depth of RTM. Greater awareness and capacity building will definitely ease and quicken the process. Some of the benefits to the DISCOMs are listed below:

        i.           DISCOMs would have access to larger pool of generation resources to meet their contingent requirement in real time as against the existing bilateral resources (under the right to recall) to meet contingencies;

      ii.           Prices discovered in real time market are likely to be more efficient than the cost of procurement of power from the bilateral arrangement under the right to recall;

    iii.           In the event the generation resources (with which the DISCOMs have contracts) sell the un-requisitioned surplus in the real time energy market, the net gains shall be shared with the DISCOMs in the ratio of 50:50;

    iv.           Alternatively, the DISCOMs themselves can sell the surplus power from their contracted generation sources in the real time market and earn the revenue in full

The current framework manages real time energy imbalances as well as inadvertent system imbalances primarily through DSM/AS mechanism, and partly through re-scheduling and intra-day market in the power exchanges. This has thrown up challenges that call for changes in market design. The recommendation that has evolved is for drawing a line of demarcation between ‘energy trade’ and ‘system imbalance’ handling. There is definitely a case for co-optimization of the two segments, but this should not imply mixing up the two and managing them jointly through a mechanism (of DSM / AS) which is meant for handling only system imbalances. Further, because of the provision of rescheduling, it becomes difficult to maintain firmness of day-ahead schedule. Hence, the need for a clearly identified real time / intra-day energy market with improved processes in the form of auction and gate closure.

For operationalizing real time markets, the schedules decided at the end of RTM clearing have to be both financially and physically binding. For this, the concept of Gate Closure is to be introduced. To ensure firmness of such bids and offers, the gate for schedule revision will close before the start of the auction. The gate for schedule revision for the hourly trade for 00.00 – 01.00 Hrs closes at 22.30 Hrs of the previous day. The auction is conducted for the delivery period 00.00 – 01.00 Hrs. This process is continued every hour thereafter. The gap between gate closure and delivery period will be reduced gradually as automation of the process improves.

India has set an ambitious target of 175 GW renewable energy capacity by 2022, which is driving accelerated renewable penetration pan-India. DISCOMs will be able to optimally control their portfolio of power purchases, so they will not need to tie up excess energy. This will lead to cost optimization of power procurement and a stable supply for customers as any last-minute power demand can be easily purchased from the RTM. RTM will help address grid management problems due to the erratic and unpredictable nature of renewable energy production and therefore lead to the introduction of higher volumes of renewable energy resources into the grid. Therefore, RTM will result in shorter bidding time, faster scheduling and specified processes enabling participants to access resources across the competition-fostering all-India grid.

Policy interventions by the Ministry of Power and the CERC have enabled POSOCO 's successful adoption of the Real Time Market (RTM) on 1st June 2020. RTM has marked the beginning of a new age for the Indian Electricity Sector by providing participants with more flexibility and transparency to optimize portfolio management and take care of contingencies closer to delivery time with much greater certainty.