Green Market

Catalysing India’s energy transition

Rohit Bajaj, Head and Senior Vice-President, Indian Energy Exchange Limited
Shruti Bhatia, Head, Corporate Communications and CSR, Indian Energy Exchange Limited

Until August 2020, exchange-based power markets could only procure re­newable energy through renew­able energy certificates (RECs). Entities on the demand side were procuring rene­wable energy through either long-term contracts or short-term RECs to fulfil their renewable purchase obligations (RPOs), mandated as per the Indian Elec­tricity Act, 2003. This changed in August 2020, when the Central Electricity Regula­tory Com­mi­s­sion approved trading in re­ne­wable en­ergy with term-ahead contra­c­ts on the po­w­er exchanges, paving the way for the es­tablishment of a first-of-its-kind “green market” in India.

The green market

The green market at the exchanges now offers delivery-based contracts on day-ahead as well as term-ahead basis, up to 11 days. Trading in term-ahead contracts co­mmenced in August 2020, while trading in the day-ahead market was inaugurated in October 2021 by R.K. Singh, minister for power and new and renewable en­er­gy. Since inception, the green market has ac­hieved trade of 4.13 billion units and has enabled transparent, competitive pri­ce dis­covery for both solar and non-solar po­wer, besides enabling flexibility in procurement of renewable energy.

In the green day-ahead market, bids for conventional and renewable energy are received in an integrated manner, but th­rough separate bidding windows. The ma­r­ket pursues a double-sided, closed, an­onymous auction framework to allow the most transparent and competitive price discovery. The clearing of electricity volumes takes place in a sequential manner – first in the priority renewable segment, followed by the conventional segment. As of date, many renewable en­­ergy generators are getting paid a fixed “feed-in tariff” for a contractual term. Some of these contracts may ex­pi­re in the near future. These generators wo­­uld now have the option of selling power in the green day-ahead market or the term-ahead market, which offers tra­ding in intra-day, contingency, daily and weekly contracts in both solar and non-solar segments.

Markets and energy transition

As a signatory to the Paris Climate Agree­ment 2015 and as per the recent commitments made at COP26, India has voluntarily committed to installing 500 GW of renewable energy by 2030 and meeting 50 per cent of total electricity consumed through renewable energy. Having alrea­dy achieved over 100 GW, we need to de­p­loy another 400 GW of green capacity in this decade, requiring 40 GW of green capacity addition on a yearly basis for the next 10 years.

The green market offers immense benefits such as transparency, competitive pri­­ces, payment security and flexibility in pro­curement, which could catalyse the creation of a pan-India green market and help achieve India’s renewable en­ergy targets. The market will also en­courage green ge­nerators to adopt part-market and part-power purchase agreement mo­del. The payment security offer­ed by the market mechanism also helps in addressing the issue of non-payment of dues faced by renewable energy developers, which continues to plague renewable energy development across India. The markets will also encourage renewable energy-rich states to develop capacity beyond their own obligations and offer it for sale on a pan-India market.

The government has also announced some measures, including waiver of inter-state transmission charges for trading of electricity generated or supplied from solar, wind, hydro-pumped storage and battery-based energy storage systems; well-defined RPO trajectories; re­design of the REC mechanism; and inc­reased focus on local renewable energy manufacturing to boost markets as well as the ecosystem. However, much more needs to be done. The time is appropriate for deepening green markets and introducing other futuristic mar­ket products.

Markets around the world

Globally, greater penetration of renewab­les has been facilitated by power markets. European countries such as Norway, Swe­den and Finland have higher shares of renewable energy as a part of their total energy mix, and the green energy in these countries is routed through exchanges, en­abling efficiency, competitiveness and fle­xibility in trade. Also, several global el­e­c­tricity markets around the world now ha­ve a single market for renewable and conventional energy sources, which has gre­a­tly eased access to energy, driven do­wn prices, and helped deepen rene­wab­les penetration.

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