Market-Based Economic Dispatch: New Power Sector Reform To Be Rolled Out From April

The Ministry of Power plans to implement the market-based economic dispatch from April 1, 2022, as it aims to help power producers struggling without long-term supply pacts.

The ministry, according to a release from the Press Information Bureau, recognised the need for a consensual and phased approach in implementing the scheme that will help participants and power exchanges.

How Will It Work?

The scheme is a nationwide short-term power trading mechanism where supply from generators quoting the lowest pricing gets sold first.

The plan’s first phase involves mandatory participation of inter-state generating stations—that includes all of NTPC Ltd.’s generating stations. Other generators can participate on a voluntary basis.

Prior to the roll-out, the Central Electricity Regulatory Commission will align its regulations and conduct mock drills to ensure that the system runs smoothly, the circular said.

The commission has implemented the MBED framework in the day-ahead horizon. The framework will ensure that the cheapest generating resources across the country are dispatched to meet the overall system demand, resulting in a win-win situation for distribution companies and generators and offer significant annual savings for consumers. According to the statement, MBED will result in 5% reduction in cost of power to the consumers.

Who Will Benefit

Initial channel checks indicate NTPC is confident of recovering fixed or variable charges according to Section 62 of Electricity Act, Rohit Natarajan, associate vice president-research at Antique Stock Broking, told BloombergQuint.

“Irrespective of platform—or changes in plant load factor, NTPC's profitability will be status quo. Moreover, given the cost leadership, NTPC's offer price may end up being the minimum cost price for MBED,” he said. “Channel checks with PTC India indicate that exchanges will be the biggest beneficiary.”

Having said that, regulations on pricing and platform aren’t out yet, Natarajan said. An MBED-like regulation has to be followed by coupling regulations, which will put all exchanges on same platform, he said.