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After the successful launch of Green Term-Ahead Market (GTAM) in
August 2020, India is gearing up to launch Green Day Ahead market
(GDAM) — a marketplace for trading of renewable power on a
day-ahead basis. The intent is to promote merchant green power
plants and provide additional sale avenues to existing renewable
power plants that are either facing payment risk with the
distribution companies (DISCOM) under the existing PPA or have
surplus energy.
The Ministry of Power (MoP), in its order dated March 2021 to
the Central Electricity Regulatory Commission (CERC) and the
national load dispatch center (POSOCO), issued a directive
soliciting the entities to prepare necessary technical,
operational, policy, and regulatory ecosystem that will enable the
participation of renewables in the Day-ahead market (DAM) alongside
thermal generation. The proposed GDAM market structure will be
within the existing DAM structure but will create a separate
clearing mechanism and price discovery for renewable and
conventional energy sources. Both the energy sources will be
cleared by the same exchange one after the other, with priority
given to renewables.
The GTAM allows RE plants to sell renewable generation (solar
and non-solar separately), bilaterally, in the open market through
exchange without getting into a long-term power purchase agreement
(PPA). Since its inception, 972 million units of RE generation
(representing 1% of total RE generation during the same period) has
been traded in GTAM with an average price of 3.90 Indian rupees/kWh
($55.71/MWh) against the average price of 3.10 Indian rupees/kWh
($44.28/MWh) in the traditional DAM during the same period. With
the launch of GDAM, more volumes are expected to come to market and
be able to trade on a daily and real-time basis.
Proposed market structure is unique with no precedent
from international power markets
In all the major electricity markets globally (Australia,
Singapore, European Union, United Kingdom, various RTO/ISOs in US
viz CAISO, MISO, PJM, NEEPOOL, ERCOT, NYISO), there exists a single
clearing market both for RE and conventional energy sources, i.e.,
Renewable generators trade under the same market rules as
conventional energy generators (except for some relaxations on
penalties/costs). Further, these electricity markets have deployed
a REC framework to capture the renewability of generation and
provide incentives to buyers (if any).
IHS Markit believes India should expand and utilize
existing DAM market along with strengthening of REC
mechanism
The intent of bringing a RE-specific market is a positive
development and intends to bring back investor's confidence.
However, the proposed framework could lead to more confusion with
multiple pricing and complicated market structure. IHS Markit
believes using the existing market structure along with the
market-based REC mechanism (DAM+REC) would be better suited for the
Indian market conditions and would have less limitations than the
proposed GDAM structure. Some proposed benefits of the combined DAM
and REC market includes:
Distinction between different types of renewable and RPO
requirements, which is not clear in proposed framework
Address the liquidity and flexibility concerns related to RE
integration, which are partially addressed now
The transmission corridors would be better utilized
There would be better integration with other market segments
(eg RTM, ASM etc)
Would support the overall intent to have a single price market
and separate instrument to price the renewability component.
