India’s Experience and Learning with respect to Power Trading Harish Saran Executive Director PTC India Ltd. [email protected]
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India’s Experience and Learning with respect to Power Trading
Harish SaranExecutive Director
PTC India [email protected]
2
1. Building Blocks for Developing Electricity Market
2. Changing Indian Electricity Market Structure
3. Role of Power Trading companies
4. Experience so far: Power Traders & Indian Power Market
5. The Bumpy road ahead
6. PTC: Catalysing Indian Power Industry
Agenda
3
Building Blocks for Developing Electricity Market
Component Indian PerspectiveGrid Code
Experienced System operators
Day ahead scheduling and dispatch procedures
Reliable Energy Accounting systems
Real time price and settlement mechanisms (UI Mechanisms)
Electricity traders dealing in Short term and Long term contracts !!Adequate transmission system
Open Access regulations
Bilateral trading through physical forward contracts ??Establishment of merchant power plants
Possibility of a day ahead power exchange etc.
4
Changing Indian Electricity Market Structure
5
Legislative Background
Private Urban
Licensees
Vertically Integrated
State Electricity
Boards
1948 1992
1995
2003
Independent Power Producers
State Reform Acts• Unbundling• Corporatization• Independent Regulation• Financial restructuring• Institutional development• Distribution efficiency
improvement• Privatization
Electricity Act• Open Access• Retail competition• Trading • Regional/national electricity
market• Independent system
operator• De-licensing • Performance based
regulation• Anti-theft• Customer service
Generation: NTPC (1975), NHPC (1975),NEEPCO (1976), NPCIL (1987)Transmission: PGCIL (1989)Financing: REC (1969), PFC (1986)Development: CEA (1951 / 1975)
1910
Tariff Policy• Competitive procurement of
power by distribution utilities
• MYT framework for utilities• Retail competition• Directional sensitive
transmission pricing
2005
Generation: UMPPs (2007) , Case 1, Case 2 procurementTransmission: Tala JV (2006)Distribution: Distribution franchisee award (2007)Power Exchange (2008)
2006-09
Revised SBD for Case-1 & Case-2
2013-14
6
Industry Structure
7
The Reforming Power Sector in India - Evolving towards creating a competitive market structure in all segments
Electricity Act 2003
Comp. Bidding Guidelines -2004/5
National ‘Tariff’
Policy -2006
Open Access, Sec 63/ Section 79( 2)/ Sec
60
Contestable Price Discovery
• Open access• Competitive bidding• Separating wires• Enforcing USO
Possible Wholesale /Retail Competition
Competitive new generation
+
+
Enabling choice
EA 2003 introducing
Non-discriminatory open access transmission
Sec 63 - ERCs to follow competitive bidding process
Sec 79(2) - CERC to advise GoI on promoting competition
Section 60 – Controlling abuse of market power
Competitive Bidding Guidelines -2004/5 –
Competitive acquisition of new generation
National Tariff Policy – 2006
Promoting retail competition
Supporting competitive acquisition of generation capacity
Enabling choice
Policy actions Evolving market structure in power sector
CERC’s advice to MoP to procure power only through competitive bidding from January 2011 is the testimony to this
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Indian Electricity Market
Category of buyers
State Utilities/Distribution
licensees
Industries
Source of Power supply
• Generation from State Generation companies/Own Generation• Long term sourcing from Central Generators-NTPC/NHPC etc.• Pooling from Ultra Mega Power projects under Case-2• Procurement through competitive bidding
• Long term (7-25 years. )• Medium Term (1-3 Years)• Short term (<1 Year)
• Power Swap arrangement between State Utilities (Banking)• Procurement from Hydel sources on bilateral basis (For up to 35
years)• Power Exchanges (IEX/PXIL)• Short term contingency through negotiation
• Self Generation (Captive Power Plant)• Procurement from State Utilities/Distribution Licensees• Procurement of Power from Power traders/Generators through
competitive bidding/Negotiation through Open Access• Procurement from Power Exchanges (IEX/PXIL)
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Bilateral Trading (Through Traders)
Direct Bilateral Trading
Power Exchanges
>1500 participants Day Ahead Market Term Ahead Market ~1000 Open Access
Consumers
Directly between Utilities or between generators and Utilities
Banking transactions
Largest component of Short-term Market
Facilitated by traders Negotiable Contracts Long-term/Medium-
term (Case-1)/Short-term
Banking transactions
Indian Power Market: Components
Trading is done through Power Traders as well as
through direct participation
10
Role of Power Trading companies
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Role of Power Trading companies
Adding liquidity
Skillful arbitrage
Finding new ways/opportunities to lay off risks
Facilitating attraction of capital to the generation and transmission Inter-connections
Bringing transparency to previously opaque markets
Removing information asymmetry
Expanding transactional opportunities
Substantially enhancing the overall efficiency of the market
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Power traders play central role to successful market evolution
Power trading companies bring to the newly competitive markets a fresh perspective- that is different than the incumbent players
New insights to the opportunities for enhancing trade and commerce
No monopoly mind-set
Orientation towards transaction on a dynamic basis
Seizing opportunities but more importantly creating opportunities
More entrepreneurship in their willingness to take on risks
More willing to take on barriers that hereto before constrained market evolution
Bring to fore the market inefficiencies
Role of Power trading companies Contd…
Power trading companies are therefore an essential element in making a successful transition to competition
13
Role of Power trading companies from Seller’s & Buyer’s perspective
Seller’s perspective Buyer’s perspective
Arrange off-take of power as made available bythe seller
Identify buyer for off-take of contractedcapacity and enter into requisite commercialagreement on back to back basis
Manage entire transaction such as Open Access,scheduling, Energy accounting & other systemcompliance/approvals
Co-ordinate with relevant agencies for transferof power
Facilitate sale of power to third party fromalternate sources in case of short off-take byoriginal buyer
Ensure payment security Facilitate energy settlement Ensure power for testing & commissioning of
Power station/Transmission lines
Arrange power as per requirement of procurer Identify Seller for supply of contracted capacity
and enter into requisite commercial agreementon back to back basis
Manage entire transaction such as Open Access,scheduling, Energy accounting & other systemcompliance/approvals
Co-ordinate with relevant agencies for transfer of power
Facilitate supply of power from alternate sources in case of generator outages
Ensure supply comfort (Contract performance) Facilitate energy settlement Supply of power to Industries/large consumers
14
Inter-state trading licensees have been undertaking trading in electricity since 2004
Power Exchanges started operating since 2008. The two power exchanges, IEX and PXIL started
their operations in June 2008 and October 2008 respectively.
As of March 2013, there were 42 Inter-State trading licensees
Sudden spurt in Short term tariffs during 2008-09 led to massive Merchant capacity addition mainly in coal rich regions leading to correction in prices & also leading to Transmission constraints.
The growth led to many Utilities opting for their own Trading companies apart from spurt in Private Trading licensees. Many of them however surrendered the license later on.
During the year 2004-05 (when trading started), licensees voluntarily charged 5 paise/kwh or less as Trading margin. Average trading margin went up to 10 Paise/kwh during 2005. The CERC then decided to regulate this and fixed the trading margin at 4 (or 7 for tariff> Rs 3/Unit) Paise/kwh on 26.1.2006. As a result, the trading margin declined from 9 paise/kwh in 2005-06 to 4 paise/kwh afterwards.
The procurement of power by the industrial sector consumers through power exchanges began in the year 2009. At IEX, Open Access industrial sector consumers bought 10.41 BUs during 2012-13
Few facts about Power trading in India
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Power Traders-Impact on Long term Power Procurement
Summary of Case-1 Bids by Utilities (Post 2009)
Particulars Details
Total Case-1 Bids invited (nos.) 29
Total Invited Capacity under the Case-1 Bids 37400 MW
Total Invited Capacity under Concluded Case-1 Bids 27650 MW
Total Invited Capacity under Unconcluded Case-1 Bids 9750 MW
Total Capacity offered by PTC 11342 MW
Total Capacity offered by Other Traders 7298 MW
Total Tied-up Capacity (PPA signed/LOI Issued) on Case-1 to date 21238 MW
PTC Successful Bids Quantum 4291 MW
Power Traders have played key role in growth of Long term power market
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Power Traders-Impact on Short term Power Procurement
Year Total ST (BU)% of Total Electricity
Generation
Through Trader (BU)
Through PX (BU)
Trader+ PX (BU)
% of Short Term
Top 5 trader
2008-09 51.43 7% 21.92 2.77 24.69 48% 79.80%
2009-10 65.9 9% 26.72 7.19 33.91 51% 83.32%
2010-11 81.56 10% 27.7 15.52 43.22 53% 85.43%
2011-12 94.51 11% 35.84 15.54 51.38 54% 78.49%
2012-13 98.94 11% 36.12 23.54 59.66 60% 70.41%
Emergence of a robust PX Marketplace!
17
Experience so far: Power Traders & Indian Power Market
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Trader have played key role in optimization of existing energy resources and bring vibrancyto commercial outlook in the sector
Short & Medium Term transactions for peak/off-peak load balancing: different products brought
in the market
Duration of Transactions (Few hours to 3 years)
Hours of Supply
Round the Clock
Evening Peak / Morning Peak
Night Off Peak / After Noon Off Peak
“As and When Available” Power for balancing Scheduled Interchanges
“Weekend / Holiday Power”
Experience so far: Power Traders & Indian Power Market
Different products for power developed; earlier unthinkable
Short term Contracts willcontinue to play crucialrole to fill the gap ofseasonal and diurnalSupply-Demand pattern& Traders will be animportant component tothis
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Experience so far: Power Traders & Indian Power Market
Increasing realization among utilities of power as a source for revenue earning
Improved PLF, particularly of State Power Utilities
No backing down
Reduction in load shedding The short term market has created “Value” for power. There is a distinct shift towards higher revenue
realization Traded volumes are rising (11% of total energy generation in the country under Short term trading)
Expanding market size
Power as a resource for earning revenue did not exist
Term Size of bilateral traderMarket (Rs. Crore)
Size of Power Exchange Market (Rs. Crore)
Total Size of Market (RsCrore)
2010-11 13268 5389 18657
2011-12 14979 5553 20532
2012-13 15624 8648 24272
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Traders are catalyzing investment into the Power sector, mainly from the private sector
e.g. Valid and binding PPAs with Power trading companies is recognized by Lenders for
Project Financing
Experience so far: Power Traders & Indian Power Market
Plan Term State Private Central Total
7th 1987-92 11867 0 9534 21401
8th 1992-97 6835 1430 8157 16422
9th 1997-02 9352 5262 4504 19119
10th 2002-07 6244 1930 13005 21180
11th 2007-12 16732 23012 15220 54963
Many states have devised policies to become Power Hubs
Higher short term power rates through trading has encouraged IPPs to invest in generating assets
Large merchant capacity got added to the grid (market determined returns)
Paradigm shift from cost plus return regime to market determined returns
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Experience so far: Power Traders & Indian Power Market
11.85
14.19
15.02
20.96
21.92
26.72
27.7
35.84
36.12
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Volume through trading licensees (BUs)
2.32
3.23
4.51
4.52
7.29
5.26
4.79
4.18
4.33
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Average tariff for Trading Licensees (Rs/kWh)
Short Term Market
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PTC: Catalysing Indian Power Industry
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Core Values Transparency The Customer is always right Encouraging Individual initiative Continuous Learning Teamwork
PTC: Vision and Core Values
Vision To be a Frontrunner in developing a vibrant Power Market
and striving to correct market distortions
24
PTC India Ltd. (PTC), the leading power trading company in India, was established in the year 1999
by Government of India as Public-Private Partnership initiative with Primary focus on creating a Power Market and to get investments in the power
sector
Promoted by public sector majors in the industry namely NTPC, PGCIL, PFC and NHPC
Mandated objectives
Promoting power trading to optimally utilize the existing resources Facilitate development of power projects under private sector Development of power market for market based investment in the Indian Power Sector Promote exchange of power with neighboring countries
PTC: Genesis & Objectives
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Promoters16%
Mutual Funds 15.40%
FIs/Banks10%
Insurance Cos.22%
FIIs16%
Others20%
Diversified shareholding
Board with eminent persons from Government and Power Sector
Professionally managed
As on 31.12.2013 Promoters
NTPC - India’s largest thermal power generator
POWERGRID - India’s largest Transmission Utility
PFC – Development Financial Institution (DFI) dedicated to the power sector
NHPC - Largest hydroelectric power generator in India
Each having share of 4.07%
PTC: Shareholding Pattern
26
1,6174,178
11,0298,887 10,119 9,549 9,889
13,825
18,236
24,481 24,325
28,597
21,864
0
5,000
10,000
15,000
20,000
25,000
30,000
FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY14*Total MUs traded
About 187 BUstraded since
inception
PTC: Growth
Trading Volume (Million Units)
6,5297,773
8,999
7,6508,857
6,658
0
2,000
4,000
6,000
8,000
10,000
FY09 FY10 FY11 FY12 FY13 FY14*
91 94
138120
129
92
0
20
40
60
80
100
120
140
160
FY09 FY10 FY11 FY12 FY13 FY14*
Revenues (INR Crore) PAT (INR Crore)
* - FY14 figures are for 9 months up to Dec’13
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Moving to become an Integrated Energy Player
PTC: Services
Advisory
• Advise : developers, state utilities
• Build strong early stage relationships
Power Trading
• Short term domestic trading
• Cross Border trade
• Long term PPAs
Investments
• Early stage support as JV partner/ co-developer
• Development capital and Last mile financing
Fuel Intermediation
• Tie up fuel from international markets
• Enter into JVs for fuel prospecting
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Proven Track Record of Value Creation
FY 2000FY 2002
FY 2004
FY 2013
Power trading business began operations
1,617 MUs traded
Market leader in trading of power: ~40% market share
28,597 MUs traded in FY 2013
Set up in 1999 at the initiative of Government of India
Listed on BSE and NSE since 2004
IPO oversubscribed 43 times
FY 2009
Raised INR 12000 mn in early 2008 through QIP
Raised INR 5000 mn in May 2009.
Net Worth: INR 2325 Cr.
in FY13
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PTC: Developing Indian Power Market
PTC created a power market which is the first of its kind in South Asia
Transition from cost-based returns to market based returns
Creating “value” for power – market based price discovery of power
Optimal utilization of generation capacity – Short-term trading
Increased generating capacity addition – Long-term trading
Development of Power Exchange- Co-Promoter of IEX
Encouraging Renewable Energy market
Introducing innovative products suiting customers needs
Single window service to take care of all intermediate requirements
like transmission agreements, metering, accounting etc.
Engaging with regulators at Centre/State level towards development of
power market
It was only afterthe success ofPTC’s model, thatthe Electricity Act2003 recognizedpower trading as adistinct licensedactivity
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Pioneer in Short Term Power Trading
Market leader in power trading for more than a decade
Transactions cover most of the State Electricity Utilities in the country and all
five electricity Regions.
Business focuses on identifying parties with a surplus of power and parties with
a deficit of power at particular times and for specific durations.
Participation in Competitive Bidding for sale/purchase of power by various
utilities under Short Term/Medium Term/Long Term
Various products created to provide flexibility to its clients
Round the clock power
Evening or Morning peak/ Afternoon or Night off-peak power
Specific time blocks for 6 to 18 hours
Weekend or Holiday power
Facilitating trading of power on IEX/PXIL
Energy Banking
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Developing Indian Power Market: Medium/Long term trading Strategizing to increase the volume and mix of Medium and Long term
trading contracts
To reduce volatility in trading volumes
Entering into Long term PPAs with new IPPs and Captives with surplus capacity
Investments into power projects to increase the trading volume
PTC has entered into PPAs and MoUs to procure long term power
PPAs initialed/ signed for 14,402 MW.
MoUs signed for 15,978 MW.
PSAs finalized for 5,985 MW
PTC is supplying power under Medium Term basis to the following
utilities
West Bengal - 175 MW
Kerala – 200 MW
Madhya Pradesh – 400 MW
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PTC- Nodal Role in Cross-Border Trade
Identified by Government of India for x-border trade a decade back
A track record of successfully managing import of entire surplus power of Bhutan since year 2002
Nodal agency for Nepal appointed by MEA, Govt. of India
Meeting NEA power requirements on commercial basis through bi-lateral contracts
Co-promoter of the most preferred PX in India –IEX
PTC enters into contracts with the concerned organizations in the neighboring countries on
commercial basis
A ‘Single Window Service’- to sell power to state power utilities, the bulk customers .
A Successful Track Record!
PTC is supportive of cooperation in regional energy trade in terms of optimizing the installed capacity
by way of utilizing the diversity in peak demand, sharing the spinning reserve, optimizing the overall
generation mix so as to address the energy security issues.
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Cross Border Power Trading
Bhutan
Long term agreements for purchase of power from Tala (1020 MW), Chhukha
(336 MW) and Kurichhu (60 MW) Hydro Electric projects in Bhutan aggregating
to around 5000 MUs every year.
In advanced stage of discussions for Banking of energy to meet the construction
power requirement of 10000 MW Hydro power capacity under development in
Bhutan.
Nepal
PSA with NEA for export of 150 MW coal-based thermal power on long-term
basis. Power flow expected in next 2-3 years
Active engagement in the up-gradation of Indo – Nepal transmission
interconnections for enhancement of power trade
Bangladesh
PTC has received LoI from Bangladesh for supply 250 MW power for a period of
three years starting from November 2013
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Indo-Bhutan Power Exchange
India has signed umbrella agreement with Bhutan under
which India provides Project investigation, design and
engineering services, constructional supervision and
highly concessional finance for the upcoming hydro
projects.
In return, India is entitled to import all the surplus
power, after meeting the needs of Bhutan.
Currently, PTC is purchasing surplus power from the
following projects in Bhutan
Chukha (336 MW)
Tala (1020 MW)
Kurichhu (60 MW)
Power export receipts constitute more than half of the
Bhutan Governments revenue and 12% of Bhutan’s GDP.
Year
Energy
export to
India (MUs)
2003-04 1751
2004-05 1735
2005-06 1762
2006-07 2963
2007-08 5234
2008-09 5883
2009-10 5334
2010-11 5569
2011-12 5274
2012-13 4791
Volume of electricity trading with Bhutan
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Tala Hydro Electric Project• Installed Capacity – 1020 MW• Present Tariff – Rs. 1.98 / kWh• PPA between PTC & RGoB since September 2006
Chhukha Hydro Electric Project• Installed Capacity – 336 MW• Present Tariff – Rs. 2.25 / kWh• PPA between PTC & RGoB since August 2002
Kurichhu Hydro Electric Project• Installed Capacity – 60 MW• Present Tariff – Rs. 1.98 /kWh• PPA between PTC & RGoB since August 2002
Projects under operation
36
Indo-Bhutan Power Exchange- Illustration
Tala Hydro Electric Project
Installed capacity : 1020 MW (6 x 170 MW)
Run of the river scheme
Peaking power ability: 4 Hrs
Transmission Interconnection:400 kV, two double circuit
Agreement signed between the two Governments on 5th March 1996
The Agreement provides for:
Surplus power i.e. all the power over & above that is required for use in Bhutanshall be sold to Government of India (GOI) and GOI is committed to purchase allthe surplus power
Initial tariff determined at Government level
The tariff to be reviewed every 5 year period as per an agreed formulae
Tala HEP (85%)West Bengal 45%
Bihar 30%Jharkhand 13.48%
DVC 6.52%Orissa 5%
NR states 15%
Allocation of Power
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Indo-Bhutan Power Exchange
PTC manages entire Co-ordination with various agencies involved in the transactions onIndian Side such as Scheduling, Energy Accounting and other system compliance/approvalsetc.
Responsible for Liasioning, Replacement of Energy meters, etc. on the Indian Side requiredfor smooth functioning of the transactions.
Has made payments timely without any dispute/default till date.
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Indo-Nepal Power Exchange
Power Trading Agreement between India and Nepal
commenced in 1966.
Initial Exchange of 5 MW in 1971
Quantum of Exchange : Moderate up to 150 MW
River Treaties:
Koshi River Treaty: 50 MW export to Nepal from Katiya in Biharfor electrification of border areas.
Gandak River Treaty: 15 MW from Bihar through Gandak-Ramnagar132 kV transmission line.
Mahakali River Treaty: 70 MUs free energy from Tanakpur HydroElectric Plant of NHPC at 132 kV level.
Present interconnections at 132 kV level:
132 KV Transmission links: Katiya-Duhabi, Raxaul – Parwanipur,Balmikinagar – Gandak, Tanakpur - Mahendranagar
May not support higher exchange
Up gradation of existing Transmission links is under progress
Year
Energy
export to
Nepal (MUs)
2008-09 50
2009-10 69
2010-11 46
2011-12 69
2012-13 78
Volume of electricity trading with Nepal
39
Indo-Bangladesh Power Exchange
A memorandum of understanding (MoU) was signed in January 2010 between Government of
India and Government of Bangladesh for bilateral Co-operation in the areas of Power Generation,
Transmission, energy efficiency, Renewable energy, Consultancy services, Training & Development
, Constitution of Steering Committee on Working Group and establishment of grid connectivity
between India and Bangladesh etc.
For exchange of power between the two countries,400 kV D/C transmission link
Baharampur(India) - Bheramara (Bangladesh) is now operational.
The Indian portion of line has been executed by Power Grid Corporation of India Ltd. (PGCIL) and
Bangladesh portion by Power Grid Company of Bangladesh Limited (PGCB) .
40
Indo-Bangladesh Power Exchange
Bangladesh Power Development Board (BPDB) issued RFP in February 2013 for purchase of 250
MW power from eligible Indian Sponsor(s) (Government/Government controlled utility) at the
delivery point being 400 KV level Bohrampur Substation, Murshidabad, West Bengal for a period
of 3 years.
PTC submitted bid for entire quantum of 250 MW power to be sourced from West Bengal State
Utility.
Subsequently, PTC was declared as Successful Bidder and LOI was placed on PTC for supply of
250 MW power to Bangladesh.
PPA was signed between PTC and BPDB in November 2013 and Power supply to BPDB started
w.e.f. 3rd December 2013 at a levelized tariff of Rs. 4.45/kWh.
41
Highlights
Steady Progress to emerge as an Integrated Energy Player
Maintained Leadership in Core Trading Business
Presence in Energy value chain by diversifying into related Energy Businesses
Experienced and Strong Management Team
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