{"id":4667,"date":"2019-03-07T12:17:34","date_gmt":"2019-03-07T06:47:34","guid":{"rendered":"http:\/\/reconnectenergy.com\/blog\/?p=4667"},"modified":"2019-03-07T12:17:34","modified_gmt":"2019-03-07T06:47:34","slug":"analysis-of-the-discussion-paper-by-cerc-on-market-based-economic-dispatch-on-a-day-ahead-basis","status":"publish","type":"post","link":"https:\/\/reconnectenergy.com\/analysis-of-the-discussion-paper-by-cerc-on-market-based-economic-dispatch-on-a-day-ahead-basis\/","title":{"rendered":"Analysis of the discussion paper by CERC on Market-Based Economic Dispatch on a day ahead basis"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Central Electricity Regulatory Commission (CERC) recently published a <\/span><a href=\"http:\/\/www.cercind.gov.in\/2018\/draft_reg\/DP31.pdf\"><span style=\"font-weight: 400;\">discussion paper<\/span><\/a><span style=\"font-weight: 400;\"> titled \u201c<\/span><b>Market-based economic dispatch of electricity: Redesigning of Day-Ahead in India<\/b><span style=\"font-weight: 400;\">\u201d. Currently, the Indian Power Sector is characterized by various players across all segments of the value chain viz. Generation, transmission, trading &amp; distribution. Among the 29 states, there is a total installed capacity of 346 GW (as on sept. 2018) out of which 57% is coal, 13% is hydro, 21% RE, 7.2% gas &amp; 2% nuclear. <\/span><br \/>\n<span style=\"font-weight: 400;\">Most of these generations are tied up in long-term power purchase agreements with the discoms and the rest in medium-term (5 years) &amp; short-term (1 year). At present, the discoms self-schedule generation from the portfolio to meet the majority of their daily power needs &amp; the remaining is procured through bilateral transactions with other discoms, through power exchanges or traders.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Issues with the current mechanism include:<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The present mechanism under the self-scheduling process does not mandate the discoms to declare the cost of their scheduled generation or the variable cost. This causes issues like leaving several low-cost generation capacities partially or sub-optimally utilized. (Because the discoms do not have visibility of other cheaper options nor do they have a right to acquire power from\u00a0<\/span><span style=\"font-weight: 400;\">generation stations they do not have a contract with) This occurs because each discom operates in its own region, known as Un-requisitioned Surplus (URS).<br \/>\n<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The case of sub-optimal utilization of generation assets become all the more prominent when the actual generation of each state is combined together and is contrasted with the cumulative pooled generation.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Given that the discoms are not obligated to reveal the variable cost of the generation that they are scheduling, true system marginal cost is not known.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Self-scheduling often constrains the optimum utilization of renewable sources of energy. As the visibility of a discom is limited to its own territory, surplus renewable energy in the state is curtailed.<\/span><\/li>\n<\/ul>\n<p><a href=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/NL-vol.-82-main-article.png\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-4668\" src=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/NL-vol.-82-main-article.png\" alt=\"\" width=\"585\" height=\"346\" srcset=\"https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/NL-vol.-82-main-article.png 585w, https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/NL-vol.-82-main-article-300x177.png 300w\" sizes=\"(max-width: 585px) 100vw, 585px\" \/><\/a><br \/>\n<b>Proposed framework &#8211; Market-Based Economic Dispatch on a Day Ahead basis<\/b><br \/>\n<span style=\"font-weight: 400;\">The discussion above suggests a need for optimization of scheduling and dispatch of generation capacities through suitable market design. The proposed framework known as Market-Based economic Dispatch (MBED) model will be on a day-ahead basis and schedule and dispatch all generation on the economic principles with respect to the technical constraints. <\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The main objective of the model will be to meet the system load by dispatching the least-cost generation mix while ensuring the security of the grid.<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Ensuring that the total cost (system cost) of the generation that meets the system load in all the time-blocks for a day is minimized. <\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The MBED model involves primarily two following aspects viz \u2018Scheduling and Dispatch\u2019 and \u2018Settlement of contacts\u2019.<\/span><br \/>\n<a href=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/nl-82-fig-2.png\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-4669\" src=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/nl-82-fig-2.png\" alt=\"\" width=\"631\" height=\"277\" srcset=\"https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/nl-82-fig-2.png 631w, https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/nl-82-fig-2-300x132.png 300w\" sizes=\"(max-width: 631px) 100vw, 631px\" \/><\/a><br \/>\n<span style=\"font-weight: 400;\">The major difference in the existing framework and the proposed MBED model is: unlike in the current framework, the discoms acquire power specifically from their contracted generators whereas, in the proposed model, the discoms would bid into the power exchange for procuring power and meeting their demand. The generators are expected to bid based on their variable\/marginal cost of generation. The existing bilateral contract holders will be paid the fixed cost separately outside the market and fit in the proposed model based on their variable\/marginal cost.<\/span><br \/>\n<a href=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/NL-82-cerc.png\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-4670\" src=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2019\/03\/NL-82-cerc.png\" alt=\"\" width=\"647\" height=\"351\" srcset=\"https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/NL-82-cerc.png 647w, https:\/\/reconnectenergy.com\/wp-content\/uploads\/2019\/03\/NL-82-cerc-300x163.png 300w\" sizes=\"(max-width: 647px) 100vw, 647px\" \/><\/a><\/p>\n<p style=\"text-align: left;\"><b>The price settlement scenario<\/b><\/p>\n<p style=\"text-align: center;\"><b>Discom\u2019s payment = Discom\u2019s load * MCP <\/b><\/p>\n<p style=\"text-align: center;\"><b>Genco\u2019s revenue = Genco\u2019s total scheduled generation * MCP <\/b><\/p>\n<p style=\"text-align: center;\"><b>\u2140 Discom payment = \u2140Genco revenue (under no transmission constraint)<\/b><\/p>\n<p><b>Bilateral contract settlement:<\/b><br \/>\n<span style=\"font-weight: 400;\">Long term contracts always have a fixed price already determined in the contract. Once the power for such contracts is settled at a market-determined price, the difference will be settled between the constituents. This is generally known as a \u201ccontract for difference\u201d and is a well-established practice in more developed power markets.<\/span><br \/>\n<b>Pros &amp; Cons of the model:<\/b><br \/>\n<b>Pros:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Better price discovery:<\/span> <span style=\"font-weight: 400;\">since the entire power capacity in the country will be cleared through the market, price discovery will be more robust and more transparent. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Reduction of Un-requisitioned Surplus (URS): a possibility of some cheaper generation capacities not getting scheduled fully will be reduced since the process of self-scheduling will be ruled out. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Along with self-scheduling other challenges emanating from the practice of self-scheduling including lack of flexibility to meet seasonal and diurnal variation in demand will be brought down drastically.<\/span><\/li>\n<\/ul>\n<p><b>Cons:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The function of Bilateral Contract Settlement (BCS) which is introduced in the model can also increase the rates of the trade and cause disruption if a proper process is not set up.<\/span><\/li>\n<\/ul>\n<p><b>Implementation timelines:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Participation will be on a voluntary basis in the initial phase<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">After a year all the discoms and other consumers will be required to participate mandatorily<\/span><\/li>\n<\/ul>\n<p><b>Conclusion:<\/b><br \/>\n<span style=\"font-weight: 400;\">Overall, the proposals outlined by CERC, when implemented will result in a radical transformation of the power markets in India. It will help eliminate inefficiencies and gaps that result from a bifurcated power sector. <\/span><span style=\"font-weight: 400;\">Like any large scale change, it will require significant preparation from all stakeholders for proper implementation, and will also take time to implement. \u00a0<\/span><br \/>\n&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Central Electricity Regulatory Commission (CERC) recently published a discussion paper titled \u201cMarket-based economic dispatch of electricity: Redesigning of Day-Ahead in India\u201d. Currently, the Indian Power Sector is characterized by various players across all segments of the value chain viz. Generation, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[195,71],"tags":[977,60,978,979,980],"_links":{"self":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/4667"}],"collection":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/comments?post=4667"}],"version-history":[{"count":0,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/4667\/revisions"}],"wp:attachment":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/media?parent=4667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/categories?post=4667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/tags?post=4667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}