India Energy Regulatory Partnership

pilot reform

In close collaboration with the National Association of Regulatory Utility Commissioners (NARUC), GTG supported Central Electricity Regulatory Commission (CERC) and India’s Forum of Regulators (FOR) to support energy institutions policies, regulations, and markets in India at the national, regional, and state levels. The partnership included two separate tracks as follows

Peer-to-peer partnership

Through a Memorandum of Understanding, NARUC collaborated with CERC to develop two thought papers and hosted knowledge exchange workshops including a study tour to the US to foster learning, exchanges of best practices and case studies between US and Indian regulators. The two papers developed under the partnership include

Enhanced Market Regulatory Practices Analysis and Primer (March 2017)

The Primer examined the national regulatory market structure and reforms of two Indian states (Rajasthan and Tamil Nadu) and presented three US case studies to provide sufficient context for baseline discussions related to improved market facilitation. The Primer provided a foundation to help explain the differences between the US and Indian contexts for areas such as regional coordination, renewable energy planning, and forecasting, To find more information on the paper, please visit

Regulatory and Market Guidelines for Developing an Enhanced Market Model Conducive to Renewable Energy Integration in India

The Guidelines examined the US experience with bilateral contracts and wholesale markets for electricity, which changed from pre-market bilateral agreements to the current use of contracts in organized markets. The Guidelines examined how contract terms and conditions evolved over these different phases, focusing on two case studies from California and New York that illustrate different approaches to regulating contracts. The report helped Indian regulators explore best practices in contracts and market models to better integrate large-scale renewable energy resources into the existing power sector utilizing long-term contracts for thermal generation. Insights shared in the Regulatory and Market Guidelines are quoted in Central Electricity Regulatory Commission’s Discussion Paper on Market Based Economic Dispatch of Electricity: Re-designing of DAM. To find more information on the paper, please visit.

Highlights from the Market Guidelines:

  • Long-term bilateral contracting can be compatible with merit order dispatch while enabling compatibility that may require markets and regulation changes to reduce self-scheduling.
  • Hedging tools are critical for managing electricity spot market risks, but the development of exchange-traded financial products for electricity will be demand-driven and iterative.
  • As reliance on spot markets increases, resource adequacy and fairly allocating fixed generation costs become more important.
  • Developing or expanding electricity markets does not reduce the cost of expensive legacy contracts, but market-based solutions can improve future decisionmaking.
  • In expanding retail competition and choice, it is important that lawmakers and regulators have a vision for who will sign long-term contracts to finance new generation.

 

Regulatory Support

Currently, the imbalance on intra-day and day-ahead basis in the country is being largely managed within state control areas resulting in limited flexibility to accommodate variable renewable energy. At present, states resort to self-scheduling generation on a day-ahead basis and do not tap into the larger available resources in other states or regions where they have no visibility. Moreover, there is no real-time market to manage energy imbalances and hence the DSM is used as the last resort—detrimental to grid safety and security. In addition, there are restrictions on participating in the intraday market in a shorter time frame largely due to the lack of automation in the open access approval process, leading to few opportunities for market participation of flexible resources to manage variability in real time.

A wide variety of reform initiatives is currently being implemented or considered to redesign the power market in India. A number of steps have been taken, from the SCED model and planning towards redesigning transmission planning and pricing, to future implementation of futures contracting and the creation of a capacity market and resource adequacy. The CERC recently issued several papers outlining key reforms: Re-designing RTM, Re-designing Ancillary Services (AS) Mechanism, and Market Based Economic Dispatch (MBED) of Electricity: Re designing of Day-ahead Market (DAM) in India. One of the key focus areas under GTG-RISE is the redesign of the Indian power market. GTG-RISE extended its support to the CERC on market-based procurement of ancillary services (AS). GTG-RISE analyzed the suitability of international market practices and AS procurement design in the Indian context. Detailed simulation modelling for designing the market-based procurement framework of AS co-optimized with energy market in DAM and RTM was undertaken.

India’s Electricity Act, 2003 and the Grid Code entrust load dispatch centers with the responsibility of monitoring grid operations, optimal scheduling, and dispatch of electricity, and with maintaining an account of the electricity transmitted. A uniform framework for scheduling, accounting, metering, and settlement of transactions (SAMAST) secures a wellfunctioning real-time electricity market and enables accurate tracing of energy and financial flows by load dispatch centers in a reliable and dispute free manner. India’s FOR mandated that states submit a detailed project report (DPR), outlining their plans for SAMAST implementation. GTG RISE assisted 15 states — Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Haryana, Himachal Pradesh, Karnataka, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Tripura, Uttar Pradesh, and West Bengal — with preparing their SAMAST DPRs. Fourteen of these states have approved DPRs and are now implementing their projects with financial assistance from GOI’s Power System Development Fund (PSDF).

ind-map

Several states still do not have in place a DSM for commercial settlement of deviations by market participants that aligns with the national framework — resulting in wide variation in threshold and penalty levels. The FOR mandated states prepare state-level DSM regulations in line with the national CERC framework. GTG-RISE team assisted electricity regulators of 11 states — Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Maharashtra, Meghalaya, Punjab, Tamil Nadu, Telangana, and Uttar Pradesh — in drafting and finalizing a total number of 19 (18 notified) DSM regulations and forecasting and scheduling (F&S) regulations for wind and solar generators. These mechanisms are crucial to enable large-scale RE integration to address deviations by market participants, maintain discipline in the grid, and improve reliability.

GTG-RISE also undertook an analysis of all solar and wind pooling substations in Gujarat and Maharashtra to understand the current forecasting accuracy and distribution of deviations in these states. The analysis provided valuable insights to rationalize the penalty mechanism for deviations in the DSM regulatory framework. GTG-RISE also assisted FOR in assessing the financial impact of RE integration in India. The GTG-RISE team reviewed the methodology adopted by the CEA for its analysis and recommended changes to accurately estimate the cost of RE integration.

Events