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CERC guidelines soon to develop ancillary market for power trading

According to reports, the Central Electricity Regulatory Commission (CERC) will soon come out with detailed guidelines to develop an ancillary market for power trading.

Official sources say such a market is a development over the existing market design in the power trading market.The ancillary power market, an alternative to the existing unscheduled interchange (UI) mechanism of power supply, is designed to handle real time active power supply demand imbalances of the users, according to officials. “If one has not planned beforehand or a requirement arises suddenly closer to evening, they need not face load shedding,” an official said. “This mechanism aims at utilising power supply which are bid at the exchanges during trading hours, but have not been cleared due to high prices or any other reason for such eventualities.”

Evening trading of ancillary power could bring the market much closer to real-time demand. This is because traders or bidders can assess the power demand more accurately, since they would be operating in the evening, much closer to real time when one actually needs power for major uses. “This would eventually mean taking the day-ahead market closer to delivery time to help participants bid more accurate quantities,” said an official.

UI of power as practised now works on availability-based rates, a structure for bulk power — and depends on the availability of power rather than real-time need. This is aimed at bringing about more responsibility and accountability in power generation and consumption through a scheme of incentives and disincentives.

Alternatively, the ancillary market proposes to aggregate uncleared supply bids of both power exchanges and stack them according to price. It would be available to the system operator as ancillary power to bridge the demand shortfall. However, the accountability factor is built in here as well. Reason: power will cost a premium price, since the power operator will pay the generator a price equal to that paid to the costliest generator.

“This is so because power is supplied at the last minute,” explains an official. “The user state or consumer should pay for immediate availability.”

Delhi-headquartered CERC has already arrived at a consensus for introduction of ancillary services in India for greater security and reliability of grid operation with all other state regulators.

However officials cautioned that the ancillary market design should ensure that there is no imposition of high-cost power on the consumers as a result of introduction of ancillary services. This high price is to be paid by the generators that are drawing the power in the last minute, and should not be passed on to the consumer, officials said. “Only those responsible for overdrawal (that is, the state power distributors ) should be made to pay for cost of ancillary services,” said a source.

The need for ancillary power has arisen since there are power shortages in the country but at the same time, there are generation capacities with unutilised power. This underscores the need for harnessing every possible generation capacity to reduce load shedding. This will also bring in the desired reliability and security of operation of the grid. It is in this context that ancillary services assume importance, according to official sources.

This mechanism will also amalgamate renewable resources and address the problems of renewable energy generation by addressing variation especially in wind generation, the sources clarified.

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