IEX

A new beginning with GTAM

The bulk of the renewable power capacity in India is sold to discoms, with a small share being allocated to captive and open access consumers and a tiny fraction passing through the power exchanges. To enable a market-based model of renewable power procurement, the Indian Energy Exchange (IEX) recently launched the Green Term Ahead Market (GTAM), after receiving the Central Electricity Regulatory Commission’s approval to trade renewable energy through contracts on its platform. This is the first time in India that renewable energy will be traded in such a way on an exchange. The aim is to create a win-win situation for both buyers and sellers of renewable energy. In an exclusive interview with Renewable Watch, Rohit Bajaj, head, business development, IEX, talks about the renewable energy trading scenario in India, the idea behind launching GTAM and its role in the country’s energy transition. Excerpts…

What is the share of trading in total renewable energy procurement? How does it compare with other countries such as Germany or France?

Renewables constitute an insignificant share of the total power traded on the exchanges in India. In the developed countries, especially European nations, renewable power is traded along with conventional power in one market, on the exchange platform. These countries, though, have varied mechanisms, such as Contract for Differences (CFD), which allow preferential treatment of renewable energy. A majority of the renewable power generated in European countries such as Germany, France or the UK is traded through the power exchanges. With the introduction of green markets, we expect the trade of green energy to increase significantly in India. As long as renewable power obligations (RPOs) keep driving renewable growth, an exclusive green market on the exchange platform would be of immense significance.

How was GTAM conceptualised? What benefits will it provide to renewable energy generators?

India is witnessing a perceptible shift towards renewables. The energy markets are a prerequisite to facilitate the building of a sustainable energy economy and accomplish the country’s renewable energy targets of 175 GW by 2022 and 450 GW by 2030. So far, the electricity markets on the exchanges have only traded in conventional power and facilitated obligated entities to meet their RPOs through the renewable energy certificate (REC) route. But now, for the first time, an exclusive separate green market has been launched.

The green market aims to provide a pan-Indian market to buyers and sellers for trading renewable energy. With the launch of the green market, renewable generators will have an additional avenue to sell their power, which has, till now, been largely sold under long and medium-term contracts. The green market will encourage green generators to even adopt part-market and part-power purchase agreement (PPA) models. The growing market and the increased flexibility will also ensure new capacity building such as green merchant generators. Today, we have about 20 GW of merchant power capacity in the conventional power space trading electricity on the exchange. About a decade back, all capacities were tied up in long-term PPAs and there was no merchant capacity. A similar model can be replicated for renewables as well.

What is the trading process for GTAM? Will it work in parallel with the REC market?

Trading in GTAM is almost like trading in conventional power on the IEX platform. Market participants will be able to trade in four types of GTAM contracts as approved by the regulator. These are: green intra-day contracts, green day-ahead contingency contracts, green daily contracts and green weekly contracts. While we have already introduced intra-day and day-ahead contingency contracts, daily and weekly contracts will be launched soon. Generators will be required to obtain no objection certificates from their respective state or regional load despatchcentres before they start selling renewable power on the exchange.

Yes, this market will work in parallel with the REC market. It will, in fact, beautifully supplement the REC market, which is currently facing a sell-side constraint due to which many distribution utilities are unable to meet their RPOs even if they wish to do so. The green market will thus provide an alternative to the REC route to ensure that RPO compliance is ensured. As the regulators are being stringent with the distribution utilities regarding the fulfilment of their RPOs, they can now meet their short-term energy and compliance needs through this green market.

What are the key issues that you foresee in renewable power trading in India as compared to conventional fuels? What can be done to bring them on an equal footing?

Just like in conventional power trading, renewable energy in India is largely being traded under long-term PPAs with some volumes being traded through over-the-counter transactions, leveraging open access. While generators are obligated to supply a fixed amount of electricity as per the signed contracts, there is an ambiguity in terms of selling surplus generation to a third party. We understand that the Solar Energy Corporation of India (SECI) has been working with ecosystem partners in this direction and some new PPA contracts now have in-built clauses that allow generators to sell their surplus capacity in the open market. We see this being favourable to those renewable generators that want to sell their surplus power on the exchange.

There are a number of renewable energy generators that have been getting paid a fixed feed-in tariff, and whose contract periods are coming to an end. Such renewable generators should now be advised to sell their power through the green market, which is now live and trading. Moreover, the market mechanism can enable the renewable surplus and renewable deficit states to trade renewable energy and balance their RPO targets in the most efficient and competitive way. The renewable-rich states would no longer be required to scale down their generation due to varied demand or sell their surplus renewable energy as conventional power. The markets can enable both the utilities as well as the generators to make meaningful gains.

What is your near, medium and long-term outlook for renewable power trading in India? What role do you foresee for GTAM in this energy transition?

The energy ecosystem around us is evolving and we are witnessing a rapid transformation. The policy-makers and regulatory authorities are proactively deliberating on the introduction of competitive market-based models to meet the aspirations of a sustainable energy economy.

In the near to medium terms, we think the green market would need to be developed, and the potential for growth is immense. The recently launched real-time electricity market, coupled with the green term-ahead market, offers a perfect solution to integrate renewable energy in the most efficient manner.

In terms of the near, medium and long-term outlook, we can think about introducing new market segments such as the day-ahead model, long duration green contracts and CFD, so that all the renewable energy generated in the country can be despatched efficiently through the power exchange. In the mid- to long-term perspective, there must be a structured transition from rigid long-term PPAs to the market model of procurement of green power. Therefore, guided and structured market development will greatly facilitate India’s energy transition ambitions.

GTAM is only the beginning; we endeavour to introduce new products and segments in the green market going forward. As India attempts to revive industrial and economic growth in the post Covid-19 world and strives towards building an Atmanirbhar Bharat, the need of the hour is a “green” economic recovery, and energy markets are imperative to achieve this aspiration.

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