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Tuesday, 30 December 2014

Congestion Management in Day Ahead Indian Energy Market

The enactment of Electricity Act 2003 was a major reform intended to bring in competition and introduction of private players in the Indian power sector. These reforms covered nearly every aspect of electricity generation, transmission, sub-transmission and distribution. 

The Central Electricity Regulatory Commission (CERC) sets the terms for open access to grid and regulate power trading in India. 

Power Exchanges in India:

The Electricity Act sanctioned wholesale and a day-ahead electricity market and opened up two Power Exchanges (PX) in India in the year 2008.      

Power Exchange India Ltd. is India’s first institutionally promoted power exchange. Indian Energy Exchange Ltd. (IEX) is another automated power trading platforms for delivery of electricity. Today more than 1000 private generators, both commercial and renewable producers, and more than 3000 open access consumers across 29 states and 5 union Territories are using the IEX platform to manage their energy trading portfolio. 

In order to promote short-term electricity trading, the third exchange i.e. the National Power Exchange (NPEX) was also approved by CERC in the year 2008-09. Although the promoters of this third exchange, a joint venture of Power Finance Corporation (PFC), National Thermal Power Corporation (NTPC), National Hydro Power Corporation (NHPC), and Tata Consultancy Services (TCS), have decided to wind up the company. Following the company’s decision, CERC has withdrawn the permission granted to the exchange.

Ways to trade wholesale electricity in India:

There are three ways to trade wholesale electricity in India:
1.      bilateral contracts between buyers and sellers,
2.      the day-ahead market and
3.      Real-time balancing or Unscheduled Interchange (UI).

These segments differ in terms of the time when electricity is traded relative to the date of delivery, how prices are set and the regulatory limits. Most trade happens through long-term bilateral contracts set more than one year in advance of delivery. Nearly 89% of the total electricity generation is traded on long-term contracts, typically between state-owned generators and distribution companies. 

Short-term Bilateral contracts, set less than one year in advance of delivery, comprise a further 5% of generation. These contracts are mediated by power traders and most often apply to daily or monthly blocks. 

The last of the scheduled power trade is the day-ahead market, which handles 2% of generation. Rest of the generation, about 3% of generation, is not scheduled, which is demanded and supplied in real time through a mechanism called Unscheduled Interchange (UI).

Day Ahead Market:

Day Ahead Market (DAM), which gets its name for hosting electricity trading one day-ahead of when the power is to be delivered, was launched in June 2008. In this market, participants transact electricity on a 15 minute time block basis, thus total 96 blocks for a day. DAM is a physical electricity trading market for delivery of electricity for some or all the 15 minute blocks in 24 hours of the next day. The next day starts from midnight. The prices and quantum of electricity to be traded are determined through a double sided bidding process.

In the double auction pools or double sided bidding process, the distribution companies also bid for purchasing power. Once the buyer and seller bid the amount of power and the price, the power exchange forms an aggregate supply bid curve for suppliers and aggregate demand bid for the buyers or consumers. The supply bids are stacked from lowest to highest whereas the demand bids are arranged from highest to lowest. 

The Market Clearing Price (MCP) is determined on the basis of intersection point of the demand and supply curve. Clearance is obtained from the respective State Load Despatch Centre (SLDC) by buyers and sellers on the basis of availability of network.    

A day prior to the actual delivery of electricity, both buyers and sellers submit their bids. These bids are totally anonymous and submitted electronically during the bid call session which is from 10.00 am to 12.00 noon. The minimum allowable quantity for buy/sell in the standing clearance should not be less than 0.1 MW. The minimum volume step is also 0.1 MW and the minimum quotation step is Rs. 1 per MWh.


In the competitive electricity market, there is significant and frequent change of power flows due to market arrangements. Because of these flow variations overloading of transmission lines and transformers beyond transfer limit may take place. This is called congestion of transmission system.

Generally when there is no congestion in the transmission system, MCP is the same for the entire Power System. But when congestion happens, the concept of Locational Marginal Price is used.

Method of managing the transmission congestion:

Congestion of transmission system should be alleviated for the secure operation of the system. It can be mitigated by rescheduling the generators, and simultaneously curtailing the electrical load. In different types of electricity market, the method of managing the transmission congestion differs. 

The following three methods:
1.      Price Area Congestion Management,
2.      ATC based Congestion Management, and
3.      OPF based Congestion Management.

Apart from the above methods, application of FACTS devices also relieves congestion. Suitable placement of various shunt and series FACTS devices are helpful in increasing the load-ability of the transmission network resulting in reduction in congestion.

In the Indian Day Ahead Market, Price Area or Market Splitting technique is adopted for congestion management. In this method, the calculated contractual power flow is compared with the available transmission capacity for spot trading. If the power flow exceeds the transmission capacity, the prices on both sides of the transmission bottleneck are adjusted so that the calculated power flow equals the transmission capacity. When the flow exceeds the capacity, the whole market area is split into surplus area and deficit area. The price of energy is lowered in the electricity surplus area and increased in the deficit area. This in turn, reduces the sale and increases the purchase in the electricity surplus area. Similarly, in the deficit area the sale is increased and the purchase is reduced.

This reduces the power flow on the congested line and the contracted flow becomes equal to the transmission capacity. The country has 5 electrical regions, the Northern region, North-Eastern region, Eastern region, Western region, and the Southern region. Each region has been divided into 2 bid-areas so as to accommodate any emergency of congestion in the intra-regional transmission system.