Price in powerspot market remain lucrative despite transmission constraints &open access restriction

CONNAUGHT PLACE, India - April 7, 2014 - PRLog -- New Delhi, April 7, 2014:

Price in the IEX spot market for power continued to be lucrative in March’14 with the average Market Clearing Price (MCP) for the month at Rs. 3.03 per unit, almost 8% lower than Rs 3.29 per unit in the previous month. The average area price across most of the bid areas decreased vis-a-vis last month with the only exceptions being Chhattisgarh where the prices increased by 25%.

About 74 MUs were traded on a daily average basis across the month, with the total cleared volume at 2.3 BUs almost similar to the volume traded last month. The exchange expected significant increase in demand of electricity in lieu of the impending Lok-Sabha elections this month, however, transmission constraints as well as open access restrictions in Gujarat and Karnataka led to stagnancy in the spot market.

During the month, Karnataka invoked Section 11 of the Electricity Act 2003, prohibiting its generators from selling electricity outside the State. About 40 generators in Karnataka were impacted due to this measure. While Gujarat imposed restriction on open access buyers in two of their distribution companies restricting them from buying electricity under short-term open access due to technical constraints.

Unavailability of the transmission corridor continued to be a deterrent in March also - about 550 MUs could not be traded due to network congestion. Moreover import of electricity into Southern region, and Northern region along with exchange of electricity between southern states was affected due to congestion.

A consolidated picture of FY’14 shows that the prices in the spot market were subdued throughout the year with average market clearing price at Rs 2.80 per unit while the volume soared to a total of about 29 BUs from 22 BUs in the previous year, reflecting an increase of about 32%. Transmission congestion was persistent through the year and led to a loss of 5.3 BUs in trading volume during the fiscal. It became more severe in the second half of the year when despite new inter-connections between South and the rest of India, transmission capacity available to the day-ahead market decreased sharply to nil. These constraints almost isolated States in S2 (Tamil Nadu and Kerala) from the rest of the grid. Also, transmission capacity between S1 (Andhra Pradesh and Karnataka) – Western Region (S1-WR) and S1 – Eastern Region (S1-ER) were insignificant, to the order of 50 to 100 MW, in most parts in the year.

Prices:

The average area prices in the North, North-East, East, West (W1/W2 bid areas) and Chhattisgarh (W3 bid area) in March’14 were Rs. 2.80, Rs. 2.71, Rs. 2.70, Rs. 2.64 and Rs. 2.52 respectively.

In Tamil Nadu and Kerala price was not discovered even a single day across the entire month due to persisting transmission congestion between the southern states.  Andhra and Karnataka were also affected by transmission constraints and could import an insignificant amount of the electricity vis-à-vis their bid. The average area price discovered in the two states was at Rs. 4.84 per unit, marking a decrease of 6% over the last month price of Rs. 5.16 per unit.

Similarly, in Punjab the average area price reduced to Rs. 2.80 per unit with a decrease of 9% from the previous month. The ensuing table compares the average area prices in March’14 vis-à-vis February’14:

*MCP (Market Clearing Price) refers to the price discovered before accounting for congestion in the transmission corridor

*ACP (Area Clearing Price) refers to the price discovered after accounting for congestion in the transmission corridor

Volumes:

A total of 2.3 BUs were traded in March’14 with 3.8 BUs of sale bids and 3.4 BUs of purchase bids.

At 92 MUs the Eastern region purchased almost 20% more electricity from spot market this month indicating 19% increase, while Punjab bought 92 MUs in March highlighting a 31% increase over last month. Area-wise buy and sell volume trend in March vis-a-vis February is represented below:

Participation:

On an average, 1029 participants traded in the spot market in March. The highest participation in the month was on 14 March, when 1209 participants traded in the spot market. Whereas, the highest ever participation recorded on the exchange was also witnessed in June’13 when 1410 participants traded in the market on a single day.