RTM Trading to Enable Efficient Price Discovery, Support Grid Balancing, Says ICRA

The recent launch of the real-time market (RTM) for power trading likely to lead to efficient price discovery in the power trading market, said a leading credit rating agency, ICRA.

On the other hand, it will also enable power distribution utilities (Discoms) and the open-access consumers to bid for electricity within 1 hour of the requirement, against the prevailing day-ahead market (DAM), it added.

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According to ICRA, this would enable Discoms and system operators to lower the cost of grid balancing by reducing dependence on the deviation settlement mechanism (DSM) and ancillary services.

Speaking on this, Sabyasachi Majumdar, Group Head & Senior VP – Corporate Ratings, ICRA Ltd said that “the introduction of RTM trading would enable efficient price discovery for electricity and support grid balancing activities. This is especially significant in the context of the rising share of renewable energy in the electricity generation in India.”

He further added “considering a 50 paise per unit saving under RTM trading against DSM and assuming a 50 per cent transition in procurement from DSM to RTM in the near to medium term, the annual savings for Discoms and open access consumers is estimated to be Rs 550 crore. Further, robust communication and software systems remain crucial for the implementation of real-time market.”

On the back of strong policy support and improved tariff competitiveness of renewable energy especially wind and solar power, the share of renewable energy in the country’s power generation mix has increased to 10 per cent in FY20 from 5.6 per cent in FY16.

The rating agency stated that this coupled with the variable nature of renewable generation adversely impacts the grid balancing process. While the gradual implementation of forecasting and scheduling mechanism for wind and solar power projects is expected to ease the grid balancing process, the availability of RTM power trading would provide an enabling mechanism for efficient grid management.

On the scenario of the price, Girishkumar Kadam, Sector Head & Vice President – Corporate ratings, ICRA Ltd, said that “the prices on the power exchange market (both RTM and DAM) are expected to remain subdued (i.e. less than Rs 3/unit) in the near term, given the surplus capacity scenario and subdued demand growth expectations for the current year, with the adverse impact of the ongoing lockdown and restrictions imposed to control Covid-19 pandemic. Subdued power tariffs on power exchange thus remain positive for the Discoms and open access consumers and in turn, would also augment the open access transactions. However, such spot tariffs remain unviable for the thermal IPPs which do not have long term PPAs.”

Recently on June 3, 2020, Power and New & Renewable Energy Minister RK Singh have launched the pan-India Real-Time Market (RTM) in electricity, placing India amongst a league of few electricity markets in the world having such system.