Power Ministry circulates Discussion Paper to seek comments on Market Based Economic Despatch (MBED)

New Delhi: Ministry of Power has circulated discussion Paper on Market Based Economic Despatch (MBED) on 1st June 2021 to all concerned stakeholders for obtaining their inputs and comments. It covers the proposed mechanism for implementation, estimation of the indicative benefits of the mechanism, key issues and suggested mitigation mechanisms and the proposed way forward. The last date of providing comments is 30th June 2021.

Through this Discussion note, the Ministry of Power intends to hold wider consultations with all the stakeholders to arrive at a consensual way forward on implementing Phase 1 of MBED from 1 April 2022.

MBED will ensure that the cheapest generating resources across the country are despatched to meet the overall system demand and will thus be a win-win for both the distribution companies and the generators and ultimately result in an estimated annual savings in excess of INR 12,000 crores for the electricity consumers.

MBED shall also facilitate larger integration of variable renewable energy by enlarging the balancing area to the national level and is also expected to optimize the need for reserves and ancillary services.

It has been suggested to implement MBED in phases. Phase 1 would involve only the thermal fleet of Central Generating Stations to test the efficacy of the MBED mechanism, identify deficiencies or potential issues that need to be addressed prior to a nation-wide rollout, familiarize all key stakeholders with the framework and allow for necessary infrastructure and systems to be built out and tested before scale up.

With significant investments over the last decade, the Indian power system has achieved larger inter-regional transfers of electricity and eliminated most constraints to realise its status as “One Nation, One Grid, One Frequency”. It currently ranks amongst the largest synchronised transmission systems in the world. Despite this enablement, the existing electricity scheduling and despatch mechanisms in the country are siloed and the day-ahead procedures result in sub-optimal utilization of the country’s generating resources. It has been observed that the states very often end up committing and utilizing costlier generation plants, while cheaper generation plants are not fully scheduled / utilized across the country.

Security constrained economic despatch (SCED) was such an attempt towards optimisation of the system cost. This has already yielded substantial saving in system cost. This was followed by the Real Time Market – a half-hourly market, which provided for an opportunity for the buyers and the sellers to buy and sell through an organised market closer to real time.

The full benefit of physical integration would be realisable when India transits to an optimisation at the national level and a country-wide balancing area instead of the siloed self-scheduling and balancing mechanisms currently followed within state or regional boundaries. Thus, the next step in reforming electricity market operations is to implement Market Based Economic Despatch (MBED), in moving towards a “One Nation, One Grid, One Frequency, One Price” framework.