The Electricity Act, 2003, was enacted, with a vision of unleashing competition in the power sector which would foster the most efficient use of resources. Introducing competition also aimed at creating vibrant markets, facilitating greater efficiency in generation, transmission and distribution, bringing transparency in pricing and eventually giving a free hand to the consumer to decide source and price of power consumed.
More than a decade later, the achievements on the open access front remain a mixed bag. While progress has been made with the advent of power exchanges in 2008, a number of hurdles remain. As a result, the market across India remains fractured with some states promoting competition while in others, monopolistic policies continue to hamper the growth of a free market. Lack of availability of adequate power despite abundant installed generation capacity is impairing the nation’s economic growth and productivity.
The power exchanges pioneered operationalisation of open access in distribution by providing a platform for buyers and sellers above 1 MW to trade in electricity using standardised contracts under the regulatory supervision of the Central Electricity Regulatory Commission (CERC). Over the last six years of operation, the market has achieved fairly good liquidity, prices are stable with only a few peaks and hardly any volatility. In fact, the price discovered on the exchange has become the benchmark for the larger system to follow. Although, almost 80 million units (MUs) of electricity, on an average daily basis, and almost 30 BUs, on an annual basis, are being traded through exchanges at the moment, the volumes, however, remain well below potential. If the state regulators, governments, transmission and distribution utilities and system operators implement open access in the true spirit, the markets can easily grow to double their current levels.
There are days on the exchange when supply exceeds demand largely because potential buyers stay away due to a variety of operational, regulatory, or infrastructural challenges. However, this comes at a huge cost. According to estimates by energy market consultant, AF Mercados, if states were to procure power instead of shedding demand, the combined cost to the distribution utilities will increase by R36,284 crore but this is much lesser to the R2.43 lakh crore cost the economy bears because of power shortfall. To put this in perspective, this amount is sufficient to set up around 40 thermal power plants of 1,000 MW each!
So what are the typical issues that bother,