Power Trading Platforms, Renewable Purchase Obligations and various Trading Mechanisms

Power Trading Platforms, Renewable Purchase Obligations and various Trading Mechanisms

Power Trading Platforms, Renewable Purchase Obligations and various Trading Mechanisms


India has set a target of 175 GW of renewable power by 2022, which would be raised to 450 GW by 2030. To meet this target, it is imperative to meet the challenges such as the need for a stronger electricity grid while maintaining a perfect balance of demand and supply.

Long-term power purchase agreements (PPAs) are replaced by the medium-term, short-term, day ahead, intraday, and real-time markets where the day is divided into 96-time-blocks of 15-minutes each. Efforts are underway to fine-tune the blocks to five minutes, as the measure ensures a higher accuracy of predictability.

Power Trading Platforms:

Power trading market has two platforms in India - Power Exchange India PXIL and India Energy Exchange (IEX). IEX holds 95 per cent of the day-ahead spot power trading market. PXIL holds 40 per cent market share in REC and term-ahead market (TAM).

Currently, Central Electricity Regulatory Commission (CERC) proposes to grant registration to Pranurja Solutions to establish and operate a power exchange. It will be the third power exchange in India after India Energy Exchange (IEX) and Power Exchange India (PXIL).

Renewable Energy Certificate:

Renewable Energy Certificate (REC) was launched in 2010 as a means for companies and states to purchase renewable energy without physically setting up renewable power plants. Project developer can sell the energy produced as REC.

1 REC = 1 MWh of power produced from a renewable energy source and is tradable at power exchanges. It is divided into Solar REC and non-solar REC.

Unfortunately, the trading of the REC market has been on pause since July'20

It is also a means to fulfil Renewable Purchase Obligation (RPO) notified under the National Tariff Policy, it is obligatory for state-owned distribution companies, open-access consumers and captive power producers to meet part of their energy needs through green energy.

Renewable Purchase Obligations (RPO):

These are the obligations that have been imposed on certain entitles to purchase energy from renewable sources by various state electricity regulatory commissions (SERCs) based on each state’s varying renewable energy potentials.

The power distribution companies, captive power plants and other large electricity consumers are bound to meet them by purchasing a certain percentage of their requirements from renewable energy sources.

Enforcement of RPOs is difficult currently due to restrictions on trading of RECs. Renewable energy producers sell electricity to distribution licensees at the rate of conventional energy and recover the balance cost by selling RECs to other obligated entities, enabling them to meet their RPOs.

Green Term Ahead Market:

The introduction of the green term ahead market at the power exchanges was a significant milestone, which helps accomplish green targets while supporting efficient and transparent integration of green energy.

Green Term Ahead Market (GTAM) is an alternative new model introduced in 2020 for selling off the power by the renewable developers in the open market without getting into long term PPAs. Also, reportedly, in the absence of a suitable trading platform before, it was observed that the RE-rich States are either backing down RE or selling their surplus RE as conventional power which was leading to losses for both DISCOMS and RE generators. Thus, these RE generators and DISCOMS would now be able to access the new niche platform – GTAM – to sell their excess power.

Following are the benefits of renewable energy trade through power exchanges:

Signaling investment for the sector

Ensuring payment to generators

Unlocking untapped renewable energy potential

Option to meet RPO at any time from the market

Reduction in curtailment of power

Mitigating DISCOMs’ price risk in purchasing long-term PPAs

The trading in the Green Term-Ahead Market commenced on August 21, 2020, at the Indian Energy Exchange and traded a volume of 51 MU during March 2021.

Further modification: Integrated Day Ahead Market for Conventional and Renewable Energy

The Ministry of Power (MoP) has decided to set up an integrated day-ahead market (DAM) at the power exchanges with separate price formation for power generated from renewable energy and conventional power.

There will be a separate (G-DAM) green-day ahead market before the current day-ahead market along with separate products for different types of renewables.

Participants can submit their bids in two parts, the quantity they are willing to trade in renewable or conventional. Sellers will be allowed to sell under the renewable energy segment only if they are pre-certified through a procedure like the REC market certification process.

The Integrated Day Ahead Market for Conventional and Renewable Energy should be ideally launched by June 30, 2021

As per Nikhil Samudre, founder of SolarMarts, “The proposed market structure will definitely allow the buyer to meet the RPO target by directly buying green power from the exchange. It also paves way for transparent price discovery of electricity generated from renewable energy resources”

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