W E L C O M E Power Grid Corporation of India Limited

UNSCHEDULE INTERCHANGE It's more than what meets the eye!!!!

WHAT’S OUR OBJECTIVE? ECONOMIC OPERATION OF THE GRID ECONOMIC OPERATION OF THE GRID PROMOTE TRADE PROMOTE TRADE STABILITY OF THE GRID STABILITY OF THE GRID ROBUST SETTLEMENT SYSTEM ROBUST SETTLEMENT SYSTEM COMMERCIAL MECHANISM WHICH COMPLEMENTS SECURITY COMMERCIAL MECHANISM WHICH COMPLEMENTS SECURITY SEAMLESS CHANGE PROCESS SEAMLESS CHANGE PROCESS FREEDOM FREEDOM

LET’S SEE HOW THE UI MECHANISM OF ABT TAKES ON MANY AVATARS The fox knows many things, but the hedgehog knows one big thing …… —Greek poet Archilochus

THE MANY AVATARS PROMOTING TRADE PROMOTING TRADE COMPETITIVE ENVIRONMENT COMPETITIVE ENVIRONMENT OPEN ACCESS OPEN ACCESS BALANCING/SPOT MARKET BALANCING/SPOT MARKET ROBUST SETTLEMENT MECHANISM ROBUST SETTLEMENT MECHANISM NASH EQUILIBRIUM NASH EQUILIBRIUM ULTIMATE OPTIMISER ULTIMATE OPTIMISER OPEN AND FAIR MARKET PLACE OPEN AND FAIR MARKET PLACE WIN-WIN PLATFORM WIN-WIN PLATFORM

IT’S SIMPLICITY ITSELF! INEXPENSIVE TO IMPLEMENT INEXPENSIVE TO IMPLEMENT MINIMUM LOGISTICS MINIMUM LOGISTICS METERING IN PLACE IN MOST PLACES METERING IN PLACE IN MOST PLACES PRICE SIGNAL AVAILABLE AT ANY POWER OUTLET ! PRICE SIGNAL AVAILABLE AT ANY POWER OUTLET ! EASY SETTLEMENT EASY SETTLEMENT EASE OF REGULATION EASE OF REGULATION EASY TO UNDERSTAND AND IMPLEMENT EASY TO UNDERSTAND AND IMPLEMENT

THE PROBLEMS EARLIER…. ERRATIC FREQUENCY ERRATIC FREQUENCY LOW VOLTAGES LOW VOLTAGES FREQUENT DISTURBANCES FREQUENT DISTURBANCES OVER/UNDER DRAWALS CAUSING CONSTRAINTS OVER/UNDER DRAWALS CAUSING CONSTRAINTS INDISCIPLINED SYSTEM OPERATION INDISCIPLINED SYSTEM OPERATION ARCHAIC SETTLEMENT SYSTEM ARCHAIC SETTLEMENT SYSTEM

AVAILABILITY TARIFF AVAILABILITY TARIFF A RATIONAL TARIFF STRUCTURE A RATIONAL TARIFF STRUCTURE SCIENTIFIC SETTLEMENT SYSTEM

WHAT IS AVAILABILITY TARIFF? PAYMENT OF FIXED COST DEPENDS ON PLANT AVAILABILITY( ie.. MW DELIVERING CAPACITY). PAYMENT OF FIXED COST DEPENDS ON PLANT AVAILABILITY( ie.. MW DELIVERING CAPACITY). VARIABLE COST IS PAID DEPENDING ON THE ‘SCHEDULED GENERATION’ VARIABLE COST IS PAID DEPENDING ON THE ‘SCHEDULED GENERATION’ ANY DEVIATIONS FROM THE SCHEDULE ATTRACTS A FREQUENCY LINKED CHARGE. ANY DEVIATIONS FROM THE SCHEDULE ATTRACTS A FREQUENCY LINKED CHARGE.

UI : THE GENESIS ABT IMPLEMENTED IN SOUTHERN REGION ON 1 st January, 2003 ABT IMPLEMENTED IN SOUTHERN REGION ON 1 st January, 2003 UI ‘ TURNOVER’ AMOUNTS TO RS XXXX CRORES TILL XXOCT03 UI ‘ TURNOVER’ AMOUNTS TO RS XXXX CRORES TILL XXOCT03 INTER-REGIONAL UI TRANSACTION : RS YYY CRORES INTER-REGIONAL UI TRANSACTION : RS YYY CRORES HIGHEST UI TRANSACTION IN A DAY (INTER REGIONAL) = ZZ MU, RS 107 LAKHS HIGHEST UI TRANSACTION IN A DAY (INTER REGIONAL) = ZZ MU, RS 107 LAKHS HIGHEST UI TRANSACTION IN A DAY (INTRA REGIONAL) = DD MU, RS SSS LAKHS HIGHEST UI TRANSACTION IN A DAY (INTRA REGIONAL) = DD MU, RS SSS LAKHS

THE AVATARS OF UI TRADITIONAL TRADITIONAL SETTLEMENT OF DEVIATIONS SETTLEMENT OF DEVIATIONS GRID DISCIPLINE GRID DISCIPLINE PRICE/OPTIMISATION VECTOR PRICE/OPTIMISATION VECTOR SPOT MARKET SPOT MARKET BALANCING MARKET BALANCING MARKET MERIT ORDER OPERATION MERIT ORDER OPERATION SETTLEMENT FRAMEWORK SETTLEMENT FRAMEWORK PUMPED STORAGE PUMPED STORAGE MERCHANT GENERATOR MERCHANT GENERATOR CAPTIVE POWER PLANT CAPTIVE POWER PLANT DISCOMS DISCOMS ARBITRAGE ARBITRAGE CATALYST FOR COALITION CATALYST FOR COALITION CO-OPERATION THROUGH NON-CO-OPERATION CO-OPERATION THROUGH NON-CO-OPERATION SELF HEALING MECHANISM’ SELF HEALING MECHANISM’ TRANSPARENCY TRANSPARENCY IMPOSSIBLE TO RIG PRICES IMPOSSIBLE TO RIG PRICES NEUTRALITY NEUTRALITY PSEUDO COMPETITOR PSEUDO COMPETITOR PAYMENT SECURITY THROUGH THE POOL PAYMENT SECURITY THROUGH THE POOL

THE BASIC PREMISE OF UI HELPING THE GRID GETS REWARDED, HURTING THE GRID IS PENALISED

FREQUENCY BASED DESPATCH BEFORE APRIL 1 st 2004

THE CAPTIVE POWER PLANT HUGE CAPACITY IS BOTTLED UP FOR WANT OF HUGE CAPACITY IS BOTTLED UP FOR WANT OF COMMERCIAL ARRANGEMENTS COMMERCIAL ARRANGEMENTS FLEXIBILITY FLEXIBILITY REGULATION REGULATION SCHEDULING MECHANISM BETWEEN SEB/TRANSCO/DISCOM AND CPP SCHEDULING MECHANISM BETWEEN SEB/TRANSCO/DISCOM AND CPP DEVIATIONS (UI) TO BE RATE DEPENDING ON THE FREQUENCY DEVIATIONS (UI) TO BE RATE DEPENDING ON THE FREQUENCY

AN EVERY DAY EXAMPLE SEB CPP + STEEL PLANT CAPACITY: 2X65 MW RATE: 100p/UNIT REQUIREMENT: 120±10 MW CAPABILITY: 120 MW AVAILABILITY: FULL FOR 10 MONTHS, ONE UNIT ON OH FOR 1 MONTH EVERY YEAR CONDITIONS 1)30 MW MINIMUM DEMAND 2)70 MW MAX DEMAND FOR 2 MONTHS REPURCUSSIONS: FOR 10 MONTHS THE CPP RUNS AT PART LOAD OF 90 MW DUE TO CONDITION 1) ABOVE

UI AND THE CPP- ADVANTAGES ADVANTAGES TO CPP ADVANTAGES TO CPP SIMPLICITY – A FREQUENCY METER IS ALL THAT IS REQUIRED SIMPLICITY – A FREQUENCY METER IS ALL THAT IS REQUIRED NO TELEMETRY OR COMMUNICATION WITH SLDC/SEB NO TELEMETRY OR COMMUNICATION WITH SLDC/SEB NO PRICE TO BE NEGOTIATED NO PRICE TO BE NEGOTIATED CPP DOES NOT HAVE TO SEARCH FOR BUYER CPP DOES NOT HAVE TO SEARCH FOR BUYER CPP CAN MAKE A REASONABLE PROFIT. CPP CAN MAKE A REASONABLE PROFIT. ADVANTAGES TO SEB/TRANSCO/DISCOM ADVANTAGES TO SEB/TRANSCO/DISCOM IMPARTIAL AND UNBIASED SYSTEM IMPARTIAL AND UNBIASED SYSTEM NEED NOT WORRY ABOUT CPP UNDER-GENERATING AT LOW FREQUENCY AND OVER-GENERATING AT HIGH FREQUENCY NEED NOT WORRY ABOUT CPP UNDER-GENERATING AT LOW FREQUENCY AND OVER-GENERATING AT HIGH FREQUENCY FRAMEWORK FOR SETTLEMENT IS ALREADY AVAILABLE FRAMEWORK FOR SETTLEMENT IS ALREADY AVAILABLE A WIN-WIN SITUATION !!!

ABT MECHANISM FOR DISCOMS GENCO GIVES STATION WISE AVAILABILITY FOR DAY AHEAD GENCO GIVES STATION WISE AVAILABILITY FOR DAY AHEAD TRANSCO RECIEVES ISGS AVAILABILITY FOR THE DAY AHEAD TRANSCO RECIEVES ISGS AVAILABILITY FOR THE DAY AHEAD TRANSCO BROADCASTS THE SAME TO DISCOMS TRANSCO BROADCASTS THE SAME TO DISCOMS DISCOMS REVERT BACK WITH REQUISITIONS DISCOMS REVERT BACK WITH REQUISITIONS TRANSCO FINALISES AFTER DUE CONSIDERATION (SECURITY ASPECT) TRANSCO FINALISES AFTER DUE CONSIDERATION (SECURITY ASPECT) INFORMS ISGS REQUISITIONS TO RLDC. INFORMS ISGS REQUISITIONS TO RLDC. BROADCASTS FINAL SCHEDULE TO DISCOMS BROADCASTS FINAL SCHEDULE TO DISCOMS REVISIONS IF ANY REVISIONS IF ANY

ADVANTAGES ECONOMIC OPERATION ECONOMIC OPERATION CHEAPER GENERATORS ARE ENCOURAGED CHEAPER GENERATORS ARE ENCOURAGED ONUS ON DISCOMS TO MANAGE LOADS ONUS ON DISCOMS TO MANAGE LOADS REALISTIC REQUISITIONS REALISTIC REQUISITIONS CAPTIVES AND IPP’S HARNESSED CAPTIVES AND IPP’S HARNESSED GENCO MAINTENANCE SCHEDULES WOULD BE AGRESSIVE GENCO MAINTENANCE SCHEDULES WOULD BE AGRESSIVE CONTROL OVER UI QUANTUM(HEAVY UNDER/OVER DRAWALS WOULD BE THING OF THE PAST) CONTROL OVER UI QUANTUM(HEAVY UNDER/OVER DRAWALS WOULD BE THING OF THE PAST) CAPACITY ADDITION – INVESTMENT COMMENSURATE WITH LOAD GROWTH CAPACITY ADDITION – INVESTMENT COMMENSURATE WITH LOAD GROWTH

MERCHANT GENERATORS NO FIXED COST IMPLICATION NO FIXED COST IMPLICATION LOW CAPITAL COST PLANTS LOW CAPITAL COST PLANTS CO-GENERATIVES/RENEWABLES ETC CO-GENERATIVES/RENEWABLES ETC NOT ‘TIED’ BY PPA NOT ‘TIED’ BY PPA TREATED MUCH THE SAME AS A CPP TREATED MUCH THE SAME AS A CPP ELECTRICITY ACT 2003 ELECTRICITY ACT 2003 MAY CONNECT TO ANY LEVEL IN THE GRID MAY CONNECT TO ANY LEVEL IN THE GRID OPEN ACCESS IMPLICATIONS OPEN ACCESS IMPLICATIONS DEPENDS SOLELY ON UI MECHANISM TO RECOVER COSTS (FIXED+VARIABLE+PROFIT) DEPENDS SOLELY ON UI MECHANISM TO RECOVER COSTS (FIXED+VARIABLE+PROFIT)

PUMP STORAGE PLANTS A CRUCIAL ELEMENT IN MAXIMISING PAYOFFS IN ABT A CRUCIAL ELEMENT IN MAXIMISING PAYOFFS IN ABT DEPLETED HYDRO RESOURCES DEPLETED HYDRO RESOURCES SET THRESHOLDS FOR PUMPING AND GENERATING MODES DEPENDING ON LOSS/VARIABLE COST SET THRESHOLDS FOR PUMPING AND GENERATING MODES DEPENDING ON LOSS/VARIABLE COST PLANT OPERATOR DECIDES WHEN TO GENERATE/PUMP DEPENDING ON FREQUENCY( SAY GENERATE AT F 50.2 HZ ) PLANT OPERATOR DECIDES WHEN TO GENERATE/PUMP DEPENDING ON FREQUENCY( SAY GENERATE AT F 50.2 HZ ) FLEXIBILITY AND CAPABILITY TO CHANGE MODES FAST IS THE KEY FLEXIBILITY AND CAPABILITY TO CHANGE MODES FAST IS THE KEY THE ‘STORED’ POWER IS USED TO GENERATE IN PEAK ( LOW FREQ) THE ‘STORED’ POWER IS USED TO GENERATE IN PEAK ( LOW FREQ) WATER IS RECYCLED MANY TIMES OVER WATER IS RECYCLED MANY TIMES OVER EXAMPLE:- KADAMPARAI PUMPED STORAGE SCHEME IN TN HAS A RESERVOIR CAPACITY OF 20 MU, BUT THE TOTAL GENERATION ACHIEVED THIS YEAR IS MORE THAN 500 MU) EXAMPLE:- KADAMPARAI PUMPED STORAGE SCHEME IN TN HAS A RESERVOIR CAPACITY OF 20 MU, BUT THE TOTAL GENERATION ACHIEVED THIS YEAR IS MORE THAN 500 MU) KADAMPARAI

GENERATORS :-NON-CONVENTIONAL ENERGY SOURCES VARIATION IN VARIABLE CHARGES DUE TO NATURE OF FUEL VARIATION IN VARIABLE CHARGES DUE TO NATURE OF FUEL DIFFICULTY IN ENTERING INTO PPA’s/CONTRACTS DIFFICULTY IN ENTERING INTO PPA’s/CONTRACTS SEASONAL VARIATION IN GENERATION SEASONAL VARIATION IN GENERATION UI MARKET PLACE PROVIDES A SEAMLESS PLATFORM FOR TRANSACTIONS UI MARKET PLACE PROVIDES A SEAMLESS PLATFORM FOR TRANSACTIONS THE PLANT OPERATOR DECIDES AT WHAT FREQUENCY TO GENERATES DEPENDING ON VARIABLE CHARGES THE PLANT OPERATOR DECIDES AT WHAT FREQUENCY TO GENERATES DEPENDING ON VARIABLE CHARGES

THE TRADING FRAME WORK CTU – INTER REGION CTU_WEST CTU_SOUTH CTU_NORTH CTU_EAST CTU_NE STU RLDC NLDC RLDC

INTER-REGIONAL ARBITRAGE HOW IT WORKS WESTER REGION GRID EASTER REGION GRID SOUTHERN REGION GRID FREQ = 50.2 HZ/ RS 0.70 FREQ = 49.6 HZ/ RS 2.20 DIFFERENCE IS RS 1.50 SIGNAL:- DRAW POWER FROM CENTRAL GRID ER UI SUMMARY

PICTURE 4.4

HOW ARBITRAGE HELPS TAKES CARE OF EXIGENCIES TAKES CARE OF EXIGENCIES LOW FREQUENCY LOW FREQUENCY HIGH FREQUENCY HIGH FREQUENCY KEEPS PRICE/FREQ MOVING IN A NARROW BAND KEEPS PRICE/FREQ MOVING IN A NARROW BAND HELPS CONTROL CONGESTION HELPS CONTROL CONGESTION DECREASE LOSSES DECREASE LOSSES MERIT ORDER OPERATION IN BOTH REGIONS MERIT ORDER OPERATION IN BOTH REGIONS

GAME THEORY CONCEPTS MATHEMATICAL ANALYSIS FOR INTERACTIONS BETWEEN PEOPLE. MATHEMATICAL ANALYSIS FOR INTERACTIONS BETWEEN PEOPLE. THESE INTERACTIONS ARE CALLED GAMES. THESE INTERACTIONS ARE CALLED GAMES. GAMES ARE PLAYED BY RATIONAL PEOPLE. GAMES ARE PLAYED BY RATIONAL PEOPLE. RATIONAL PLAYERS IN A GAME LOOK TO MAXIMISING THEIR INDIVIDUAL PAY-OFF’s. RATIONAL PLAYERS IN A GAME LOOK TO MAXIMISING THEIR INDIVIDUAL PAY-OFF’s. AN EQUILIBRIUM POINT IS REACHED WHEN ANY PLAYER CANNOT INCREASE HIS PAYOFF UNILATERALLY. AN EQUILIBRIUM POINT IS REACHED WHEN ANY PLAYER CANNOT INCREASE HIS PAYOFF UNILATERALLY. THIS IS REFFERED TO AS A ‘NASH’ EQUILIBRIUM AFTER ITS PROPONENT JOHN NASH. THIS IS REFFERED TO AS A ‘NASH’ EQUILIBRIUM AFTER ITS PROPONENT JOHN NASH. SOME OF THE TYPES OF GAMES ARE SOME OF THE TYPES OF GAMES ARE ZERO SUM GAME ZERO SUM GAME CO-OPERATIVE/NON CO-OPERATIVE GAMES CO-OPERATIVE/NON CO-OPERATIVE GAMES REPETITIVE GAMES REPETITIVE GAMES GAME THEORY CONCEPTS ARE USED TO MODEL HUMAN BEHAVIOUR/STRATEGIES IN A COMPETITIVE MARKET GAME THEORY CONCEPTS ARE USED TO MODEL HUMAN BEHAVIOUR/STRATEGIES IN A COMPETITIVE MARKET THESE CONCEPTS CAN FIND PARALLELS IN THE UI MARKETPLACE THESE CONCEPTS CAN FIND PARALLELS IN THE UI MARKETPLACE

GAME THORY AND UI ZERO SUM GAME :- Σ OF EVERY PLAYERS UI IS ZERO ZERO SUM GAME :- Σ OF EVERY PLAYERS UI IS ZERO REPETITIVE GAME :- PLAYED EVERY 15 MTS (ONE TIME BLOCK OF ABT) REPETITIVE GAME :- PLAYED EVERY 15 MTS (ONE TIME BLOCK OF ABT) NON-CO-OPERATIVE GAME :- EVERY PLAYER LOOKS TO MAXIMISING PAYOFF – ‘…. ITS’ HUMAN TO WANT MORE….!!!’ NON-CO-OPERATIVE GAME :- EVERY PLAYER LOOKS TO MAXIMISING PAYOFF – ‘…. ITS’ HUMAN TO WANT MORE….!!!’ EQUILIBRIA IS REACHED BETWEEN 49 AND 50.5 HZ- STEADY STATE FREQUENCY EQUILIBRIA IS REACHED BETWEEN 49 AND 50.5 HZ- STEADY STATE FREQUENCY MULTIPLE EQUILIBRIUM POINTS IN THE RANGE MULTIPLE EQUILIBRIUM POINTS IN THE RANGE THIS EXPLAINS WHY AN UI MARKET OF A FEW CRORES REGULATES A MARKET MORE THAN A THOUSAND TIMES ITS SIZE! THIS EXPLAINS WHY AN UI MARKET OF A FEW CRORES REGULATES A MARKET MORE THAN A THOUSAND TIMES ITS SIZE!

UI : FUTURE REFINEMENTS TIGHTEN THE FREQUENCY RANGE TIGHTEN THE FREQUENCY RANGE TIME-OF-DAY ELEMENT TIME-OF-DAY ELEMENT CHANGE THE SLOPE CHANGE THE SLOPE

3 D UI OF THE FUTURE? UI RATE