High Price Day Ahead Market at power exchanges had no trade for over a month since launch

The High Price Day Ahead Market has seen a tepid response since its launch on March 9.

The High Price-Day Ahead Market (HP-DAM) that was launched by Union Minister for Power and Renewable Energy RK Singh on March 9 did not have any transaction for more than a month since its start, data accessed by Moneycontrol showed.

HP-DAM is a segment in the Indian Energy Exchange (IEX) where expensive electricity from sources such as imported coal-based plants, gas-based plants and renewable energy with battery storage systems can be traded between power utilities (gencos and discoms).

India has three power exchanges - IEX, PXIL and HPX. As on date, only IEX is offering the HP-DAM segment, while PXIL is scheduled to start it soon as well.

Earlier, for lack of a dedicated segment, such power had to be sold in the normal day ahead market (DAM) because of which it either had less takers (buyers) or had to sell at much lower costs as the price cap for DAM was Rs 12 per unit, which now has been brought down to Rs 10.

Despite its launch last month, there was zero transaction in the HP-DAM segment for about 36 days. It was only on April 15 that the segment saw the completion of its first transaction.

"We are delighted to share that the first transaction in HP-DAM was executed on April 15, 2023 and delivered on April 16, 2023. We would like to thank all our members and partners, Green Valley Industries Ltd., IL&FS Tamil Nadu Power Company Ltd, Udupi Power Corporation Ltd, and respective trader members Instinct Infra Power Ltd, PTC India Ltd, and Adani Enterprises Ltd for making it a success," read the message sent out by IEX after the trade was completed.

Moneycontrol accessed data from the power exchange and found that the segment had received sell bids, but there were no buy bids. Data from April 1 onward shows that there were 26 sell bids against which the purchase bids were only 15. The purchase bids started coming in around April 14-15 and peaked around April 17-18 when the power demand also rose to at least 215 gigawatts.

Overall, until now, 194 MWh has been traded in HP-DAM. The highest trade happened on April 17, with 98 MWh at the market clearing price of Rs. 19.64, which means it almost hit the price cap once at least. To be sure, the government had reduced the price ceiling of HP-DAM segment from Rs 50 per kWh to Rs 20 per kWh from April 4. One reason for reducing the price cap was to ensure more trade volumes as the newly launched segment has seen a tepid response.

However, officials said that the low trade volume is also because the power demand is relatively stable at present due to rains across several parts of the country. "In the ensuing months of May, June and July, HP-DAM will play a crucial role in ensuring power availability," said a senior power official requesting anonymity.

In a written response to the queries sent by Moneycontrol, IEX said, "The High Price-DAM segment is part of the proactive steps taken by the Government of India to avoid a power crisis by ensuring adequate power supply. This segment is providing an avenue to high variable cost generators to participate in Power Exchanges, bringing additional liquidity during the peak season.”

In an interview with Moneycontrol on April 13, Union power minister RK Singh also said that the decision to lower the price ceiling of various market segments in the power bourses was intended to keep tariffs low.