“IEX has received approval from CERC to launch the High Price Day Ahead Market (HP-DAM) in the integrated day ahead market (I-DAM) segment. We expect to launch the segment by the mid of March 2023,” Rohit Bajaj, Head-Business Development, Regulatory Affairs and Strategy, IEX, told PTI.
The relaxation in norms by the CERC will provide relief to three categories of power generating companies (gencos) — those running their plants on expensive natural gas (RLNG), imported coal and BESS (Battery Energy Storage System).
At present, there is a price ceiling of Rs 12 per unit in the Day Ahead Market (DAM) on the energy exchanges.
With the current level of upper price cap, gencos having high variable costs for operating their plants are generally not keen on selling electricity on the energy exchanges and this in turn results in stranded power generation capacity.
Against this backdrop as well as the upcoming summer season, the CERC, earlier this month, allowed the introduction of a new segment — HP-DAM — wherein electricity can be sold and bought at a price as high as Rs 50 per unit.
However, the regulator has not kept the floor (minimum) price of power for the HP-DAM market. The CERC has allowed three categories of power generators to participate in the HP-DAM market — gas-based generating stations using imported RLNG and naphtha; units using only imported coals and BESS.
The demand for electricity is expected to touch 230 GW in April this year. The power ministry has already asked 15 plants that use imported coal to function with full capacity from March 16 to June 15 so as to avoid any shortfall in electricity supply during the summer.
Such plants have also been permitted to pass through the high price of imported coal used for generating electricity.
About the demand under the HP-DAM, Bajaj said, “During the summer and other high-demand months, we anticipate decent volume in the segment and expect this market to be liquid. As the number of buyers increases, more sales are expected coming into this market. We expect this new segment to give us the flexibility to boost our trade volumes.”
He explained that HP-DAM will function as part of the integrated DAM, with sequential price discovery without price cap.
“There will be sequential clearing of G-DAM (green day ahead market) first, followed by DAM (day ahead market) and finally HP-DAM. Buyers and eligible sellers will have the option to transfer unselected bids in DAM to HP-DAM, with the flexibility to specify different prices for different segments at the time of bidding. There will be a single window for bidding as per the existing timeline of 10 am to 12 noon,” he informed.
He also stated that the price discovery for HP-DAM will be on Double-Sided Closed Auction, same as G-DAM, DAM and RTM (real time market) segments.
He was of the view that the HP-DAM will create an enabling market segment for sellers with high-cost generation and the willing buyers to trade.
Once this segment commences, gas-based power generators, imported coal-based plants and even battery-energy storage systems will be able to sell electricity on the market, he pointed out.
With electricity demand likely to surge in the upcoming summer season, the HP-DAM segment will facilitate additional capacity to meet part of this incremental demand, he added.