Power Market

Why in News?

• Recently, India is changing its power market system from a decentralized, voluntary and short-term market to a mandatory pool model that eliminates fixed-price contracts. While, the European Union is going in the opposite direction.

Highlights

• The EU wants to change its power market because a gas shortage caused high electricity prices in 2022.
• The high prices happened because electricity prices are set by the most expensive power plant, usually a gas plant.
• The European Commission Is considering different ways to change how power plants sell electricity.
• They want to use long-term contracts that give power plants a fixed price for their electricity.
• This will help make electricity prices more stable for households and businesses
• India is developing a new electricity market model called the MBED mechanism.
• This will centralize scheduling for dispatching the country’s annual electricity consumption of around 1,400 billion units.
• MBED is a way forward to deepen power markets in line with the Centre’s ‘One Nation, One Grid, One Frequency, One Price’ formula.
• It will ensure that the cheapest electricity generating resources across the country are supplied to meet the overall system demand and will therefore be a win-win for both the distribution companies and the generators and result in savings for consumers.
• It will also mark a clear shift from a decentralized model which is backed by the Electricity Act, 2003.
• Currently, the electricity grid is divided into state-wise autonomous control areas managed by the State Load Dispatch Centers (SLDCs), which in turn are supervised by Regional Load Dispatch Centers (RLDCs) and the National Load Dispatch Centre (NLDC).
• The MBED model wants to change this by having a central market operator in charge of all the electricity. This new model would limit the current options and discoms and State Load Dispatch Center would have to buy or sell electricity in real-time even if it’s just to balance demand.
• India is also making a new rulebook for the electricity grid and a new way for people to use the electricity network called GNA (General network access) that is more open and flexible.