Electricity power trading in india


It absorbs both liquidity risks as well as credit risk of the discoms and insulates the generator from the financial condition of a discom. Trading also facilitates competition among generators by offering various options for buying electricity to discoms.

In India, power trading is in an evolving stage and the volumes of exchange are not huge. In other words, the suppliers of electricity have little choice about whom to sell the power and the buyers have no choice about whom to purchase their power from.

Power generation, transmissions are highly capital intensive and the Fixed Charge component makes up a major part of tariff. India being a predominantly rural economy, power demand is seasonal, weather sensitive and there exists substantial difference in demand of power during different hours of the day with variations during peak hours and off peak hours. Further, the geographical spread of India is very large and different parts of the country face different types of climate and different types of loads.

Power demand during the rainy seasons is low in the States of Karnataka and Andhra Pradesh and high in Delhi and Punjab. Whereas many of the States face high demand during evening peak hours, cities like Mumbai face high demand during office hours.

The Eastern Region has a significant surplus round the clock, and even normally power deficit states with very low agricultural loads like Delhi have surpluses at night. This situation indicates enough opportunities for trading of power. This would improve utilization of existing capacities and reduce the average cost of power to power utilities and consumers. In view of high fixed charges, average tariff becomes sensitive to PLF.

Trading of power from surplus State Utilities to deficit ones, through marginal investment in removing grid constraints, could help in deferring or reducing investment for additional generation capacity, in increasing PLF and reducing average cost of energy. After the enactment of Electricity Act in , the concept of Open Access and Power trading were created.

Since generation and consumption of Power is not evenly distributed in India, the concept of Power trading enables surplus generation from one Region to flow to another Region which is deficit in Power or within the same Region. Power trading fundamentally means that a transaction where the price of power is negotiable and options exists about whom to trade with and for what quantum. Traditionally, trading licensee has been viewed as seller of electricity who fulfills the needs of the distribution companies discoms by arranging electricity supply at the discoms desired delivery point.

Importantly, trading licensee act as risk absorbers between generators and discoms ensuring that generators are paid on time by bringing in their finances in case there is a delay in payment by a buyer. It absorbs both liquidity risks as well as credit risk of the discoms and insulates the generator from the financial condition of a discom. Trading also facilitates competition among generators by offering various options for buying electricity to discoms. In India, power trading is in an evolving stage and the volumes of exchange are not huge.

In other words, the suppliers of electricity have little choice about whom to sell the power and the buyers have no choice about whom to purchase their power from. Power generation, transmissions are highly capital intensive and the Fixed Charge component makes up a major part of tariff.

India being a predominantly rural economy, power demand is seasonal, weather sensitive and there exists substantial difference in demand of power during different hours of the day with variations during peak hours and off peak hours.

Further, the geographical spread of India is very large and different parts of the country face different types of climate and different types of loads.

Power demand during the rainy seasons is low in the States of Karnataka and Andhra Pradesh and high in Delhi and Punjab. Whereas many of the States face high demand during evening peak hours, cities like Mumbai face high demand during office hours.