consultative workshop on competitive wholesale …
TRANSCRIPT
Agenda
Part-2 Market Development (GoP’s Decisions and NEPRA Act 2018)
Part-1 Historical Perspective of Market Development in Pakistan
Part-3 Market Structures Evolution in Pakistan
Part-6 CTBCM Detailed Design
Part-5 Implementation Coordination as Proposed & Approved in CTBCM Model
Part-7 Takeaways / Recommendations
Part-4 Preparation of CTBCM & Its Approval & Actions for Entities
Part-8 Comments / Feedback
WAPDA Strategic Plan
1992 1997 1998
• Enhance capital formation• Improve efficiency and
rationalize prices, and• Move towards full
competition by providing the greatest possible role for the private sector through privatization
NEPRA Act
• Enactment of NEPRA Act• Formation of Independent
Regulator (NEPRA) to oversee the restructuring process
Unbundling of WAPDA
PEPCO
- Transition Management Company
- Oversee the corporatization & privatization
- Formed Business Plan for Restructuring process
GENCOs (4)
DIS
CO
s (1
0)
NTDC
• LESCO• GEPCO• FESCO• IESCO• MEPCO• PESCO• HESCO• QESCO• TESCO• SEPCO
- Thermal Power Generation Companies
- Transmission Network Operator - System Operator- Planner- Power Procurer - Power Market Development
- Perform Supply Business
- Perform distribution, construction, expansion, maintenance operation of the distribution system
Power Sector Reforms (Historical Perspective)
2002 2013
- NTDC was granted Transmission License to perform five functions:.1) TNO.2) SO.3) Planner.4) Metering Service Provider.5)Contract Registrar/
PEX Administrator
- Per licensing requirement, NTDC was mandated to develop the whole sale market (CTBCM) by 2008
Historical on Market Development
2009
- National Power Policy 2013-“… Innovative business and regulatory models will be deployed to weaken the monopolies, increase efficiencies, and decrease costs through competition. Wheeling charges and whole sale markets may be introduced to introduce multiple buyers and sellers in the market place.”
Legal formation of CPPA. However, functioned as Department of NTDC from 2009 to 2015.
2017
- ECC’s Decision April 2015- CPPA through consultation prepareCTBCM Model and Plan by June 2017
- The CTBCM is for wholesale market- Will be approved by NEPRA- Commercial Operations date: June 2020
- CPPA Operationalized- CPPA formed Market
Development Department
2015
- CPPA prepared and submitted the model and plan to Board in July 2017
- The Board formed a Special Committee - The Special Committee evaluated the
plan- Board principally approved CPPA’s re-
structuring and allowed submission of CTBCM submission to NEPRA
- Consultations with SECP
2018
-The model and plan submitted to NEPRA for review
- Request for ECC in amending timelines
- New NEPRA Act Amendments
- MO’s Authorization
- Comments- Partnerships
www.cppa.gov.pk
2019
-NEPRA Approved CTBCM Model
www.cppa.gov.pk
Government of Pakistan
MoE (Power Division)
Pakistan Atomic Energy
Commission
NEPRA (Regulator)
Private Sector
WAPDA AEDB PEPCO PPIBCHASHN
UPPKANUPP IPPs
SPPs/ CPPs
K-Electric
Mega Dams
Water Projects
GENCOs DISCOsNTDC
(TNO+SO)
CPPA-G
Overview: Market Operator in the Electricity Market
MO
License
es
Ow
ne
rship
Ownership
Market Participant
Service Providers
SO + TNO
Ministry of Water
Resources
Electricity Market: Service Providers and Participants
Generators as Market Participants Transmission Service Provider NTDC
- DISCOs: Wire Business & Electric Power Supplier - Participants as Electric Power Suppliers 10 DISCOs and KE
- Service Provider for wire business/distribution
- BPC > 1MW- Others non-eligible
customer
Wholesale Electricity Market Operator
www.cppa.gov.pk
Legal NEPRA Act 2018 Electricity Act 1910 Constitution Parliament
PolicyNational Electricity
Policy & PlanPower Policy 2013 1994, 2002, 2015 CCI/MoE
RegulatoryMarket Rules, Power Procurement Rules
Grid, Commercial and Distribution Codes
Wheeling, Competitive Bidding, Import Regulations etc NEPRA
Generation IPPs Public Sector K-ElectricRegulated to Competition
TransmissionTransmission Network
Operator (TNO)System
Operator (SO)Planner
NTDC Regulated Service Provider
Metering Service Provider
System
OperatorSupply = Demand Operational Planning
NPCC RegulatedService Provider
MarketOperator
Agency Role Billing & SettlementMarket & Product
Development
CPPA RegulatedService Provider
DistributionDistribution Wire
Business (Regulated)Sales or Supply Business
(Competition)Metering Service
Provider (Regulated)DISCOs/KE
Markets Single Buyer Competitive Wholesale Competitive RetailIncrease
Competition
Paki
stan
’s E
lect
rici
ty M
arke
t Fr
amew
ork
Electricity Market Framework
Reliable Grid
Market Development Updates
• The journey started in 2015
• MO’s capacity in Market Design and Development• Dedicated Market department
• MRC Market Design Consultants hired through ADB’s support
• MoUs with EPIAS, EPEXSPOT and LUMS as Market Development Partners
• Training Partners (PSR Brazil, CRA and others)
• Learning Exchanges (Turkey, India, NYISO, IESO, AESO, South Korea)
• Market Literature studied (NordPool, European, North American and other Latin American Markets)
• 100+ consultative sessions including workshop and one-to-one consultation meetings with stakeholders
• Around 2,000 man days of training on market development
www.cppa.gov.pk
www.cppa.gov.pk
Phase-I(Conceptual Market Design)
June 2016– July 2017 In parallel
Phase-II(Detailed Market Design)
Phase-III(Implementation)
Wholesale Market Design – Phased Approach
Number of Reports Produced
• Following reports have been produced:• Report 1 CTBCM Model Design – Concept Paper • Report 2 CTBCM Model – Roadmap• Report 3 CTBCM – Model Consolidated Report• Report 4 CTBCM – Detailed Design Report• Report 5 CTBCM- Market Modelling /Simulations based on SDDP• Report 6 CTBCM Financial System for CPPA Report• Report 7 NPCC Gap Analysis Report*• Report 8 CPPA’s Restructuring Report & Plan• Report 09 Integrated Electricity Market Simulation Model (IEMSM) and Report • Report 10 Data Institutionalization Report*• Report 11 Single Buyer Plus Model – Concept Paper and Plan• Report 12 Marginal Price Discovery Report
• Assistance by CPPA to DISCOs and NTDC in preparation of:• Report 13 PMS Report – Country Level x 2• Report 14 PMS Report – All DISCO x 2• Report 15 NTDC Regression Report• Report 16 Power Market Survey Manual• Report 17 Integrated Generation and Capacity Expansion Plan (IGCEP)• Report 18 NPCC Annual Production Plan based on SDDP
www.cppa.gov.pk
Market Development Core Team
Strategy & Market Development Department
Training Partners in Market Development
Strategic Partnerships
- Gen. Planning & Load
Forecast Consultants
CPPA Core Market
Dev. Team
Electricity Market Team
DISCOs Working Groups
www.cppa.gov.pk
(BME + BMC)Balancing Mechanism
ERP Data Inst.SFS Cost Opt. Tools
MP AppCDXPMonitoring
Portal
CPPA’s IT Enablement for Competitive Market Operations
IT Enablement for Future SPS Function IT Enablement for Future MO Function
DR SiteData Center
www.cppa.gov.pk
www.cppa.gov.pk
• ECC Decision April 30, 2015
• Point 9 of the Decision:
• Wholesale Competitive Trading Bilateral Contract Market (CTBCM)
• CPPA-G prepares CTBCM Plan through consultation with stakeholders
• Transition to be completed not later than July 2020 (Now Oct 2021)
• Model to be submitted for approval by NEPRA
Wholesale Market Development Mandate
www.cppa.gov.pk
NEPRA Act 2018
• Four Chapters and 51 Clauses
• Chapter 1 General; Clause 2, Definitions:
• Bulk Power Consumer
• Electric Power Supplier
• Electric Power Trader
• Market Operator
• National Electricity Policy & National Electricity Plan
• Interconnection Service
www.cppa.gov.pk
NEPRA Act 2018
• Chapter 1 General; Clause 2, Definitions:
• National Grid Company
• Provincial Grid Company
• System Operator
• Transmission
Important Clauses of the Act w.r.t today’s discussion:
• Section 14C, Captive Generation
• Section 14D, Duties of Generating Companies
• Section 16, Transmission License
• Section 17, National Grid Company
www.cppa.gov.pk
NEPRA Act 2018
• Section 23
• 23 A&B for Market Operator
• 23 C&D for Trader
• 23 E&F for Supplier (DISCOs Deemed Supplier & Last Resort Supplier)
• 23 G&H for System Operator
• Section 25 Licenses of Territory Served by KE
• 25 A Registration
• Section 31 Tariff
• Section 32 Investments & Power Acquisition Programs
www.cppa.gov.pk
Legal & Regulatory Framework w.r.t Market Development
• CTBCM in NTDCs License 2002.
• Important features of NTDC’s license PEX & CR function w.r.t Market Dev:
• Balancing services
• Dispatch Central except SPPs
• CTBCM operational by 2008
• The Grid Code w.r.t competitive market or bilateral trading:
• Balancing Code
• PSODA for generators with bilateral agreements & except 11 kV all generation on central dispatch
• Scheduling & Dispatch Code
Single Buyer Market Structure
Single Buyer: Means only one Buyer can purchase power
Buyer: Central Power Purchasing Agency Guarantee (CPPA-G) Ltd as an agent on Behalf of DISCOs
www.cppa.gov.pk
Generators CPPA-G DISCOsInvoices
CTR & ETR
Payments
Current Structure: Single Buyer Plus Market
Single Buyer Plus: Means where BPCs can purchase directly from Generators as well as DISCOs are also allowed to purchase bilaterally fromgenerators apart from single buyer
www.cppa.gov.pk
Generators CPPA-G DISCOsInvoices
CTR & ETR
Payments
BPCsWheeling Regulations 2016
CTBCM: Commercial Operations Oct 2021
CTBCM: Means where BPCs and DISCOs can only purchase directly fromGenerators and are allowed to purchase from single buyer only to theextent of large-scale strategic projects.
www.cppa.gov.pk
Generators CPPA-G DISCOsInvoices
CTR & ETR
Payments
BPCsWheeling Regulations 2016
www.cppa.gov.pk
CTBCM: Technical and Commercial Transaction in Proposed
Wholesale Market
GG
TransmissionSystem
DistributionSystem Non-Eligible Consumer
(<1 MW)
Eligible Consumer(>=1 MW)
Consumers
𝑃𝑃𝑃 = 𝐸𝑃𝑃 + 𝐶𝑃𝑃𝑃 𝑈𝑜𝑆𝐶 +𝑀𝑜𝐹 𝐷𝑀 𝑃𝑃𝑃 + 𝑈𝑜𝑆𝐶 +𝑀𝑜𝐹 + 𝐷𝑀
Power Purchaser (DISCO’s Agent)
Market Operator
CPPA-G
PPA/EPA
PPAA
Settlement
Central Dispatch (NEPRA Act Sec.14D and 23G)
Self Dispatch(Grid Code)
TT GS Eligible Consumers
Contract = Actual
ActualContract
Balancing MechanismBME + BMC
(NEPRA Act Sec.23E)(NEPRA Act Sec.23C) (NEPRA Act Sec.22)
Power Flow
$$
www.cppa.gov.pk
• CPPA-G prepared CTBCM Model and Plan through consultation with stakeholders and submitted to NEPRA in March 2018 for regulatory approval
• NEPRA approved CTBCM Model on December 5, 2019
• An extension of 1.5 years for COD approved by ECC in its decision dated October 30, 2019
Authority’s Approval of CTBCM Model and COD Extension by ECC
www.cppa.gov.pk
• Market Design has been approved
• Stakeholders’ actions being part of the model has been approved (17 group of actions including policy, regulatory, institutional, commercial and others)
• Authority has directed to update the plan and submit it for approval with revised timelines through consultation
Authority’s Approval of CTBCM Model
www.cppa.gov.pk
Timelines – Market Reforms
Jan Feb Mar Apr May
Jan 2020Stakeholder Consultations
(Plan Update +Detailed Design)
Feb 2020Submission to NEPRA by Feb 5
(Updated Plan +Detailed Design Reports)
Mar 2020Submission to NEPRA by
Respective Entities by Mar 5 (Plans Detailed Reports)
May 2020Updated CTBCM Plan
approved by NEPRA
1.5 Years
Nov 2021
April - May 2020Internal approvals of Budgets by respective entities’ Boards
18 MonthsImplementation of CTBCM Plan
by respective entities & Centralized Support +
Monitoring
Oct 2021Commercial
Operation Date of CTBCM
www.cppa.gov.pk
• Actions within 60 Days: CPPA to coordinate and update Implementation Plan and Detailed Designafter consultation with stakeholders
• CPPA
• DISCOs
• NTDC
• NPCC
• K-Electric
• MoE (PD)/AEDB & PPIB
• NEPRA
• Deliverables due in 60 Days after consultation:
1. Implementation Roadmap Report
2. Detailed Design Report
3. IE-MSM Report
Actions from the Decision of the Authority and Approved Market Model
Directions given in the approved Model
Directions given in the Decision Part and approved Model
www.cppa.gov.pk
• Actions within 80 Days: Relevant Entities to submit Detailed Reports on scope and immediate interventions required for CTBCM implementation
• Report Submission by NPCC
• Report Submission by NTDC
• Report Submission by each DISCO
• Ongoing Quarterly Progress and Implementation Report by respective entities
Actions from the Decision of the Authority
www.cppa.gov.pk
CPPA
Within 60 Days of Determination:
• Updated Implementation Roadmap/Plan (in consultation with stakeholders)
• Updated Detailed Design of CTBCM Model (in consultation with stakeholders)
• Updated Integrated Electricity Market Simulation Model (IE-MSM) Report
• Roadmap will include CPPA restructuring timelines which are covered in Part-II of the presentation
On Regular Basis:
• Quarterly Progress Reports on the complete roadmap
Directions in CTBCM Approval Determination for CPPA
www.cppa.gov.pk
NTDC (As Planner, Metering Service Provider and TNO)
• Provide assistance to CPPA in the preparation of CTBCM Implementation Roadmap
[within 60 days]
• Detailed Report on the interventions required for CTBCM implementation
[within 80 days]
• Quarterly Progress Reports
Directions in CTBCM Determination for NTDC
www.cppa.gov.pk
NPCC (As System Operator)
• Provide assistance to CPPA in the preparation of CTBCM Implementation Roadmap
[within 60 days]
• Detailed Report on the interventions required for CTBCM implementation
[within 80 days]
• Quarterly Progress Reports
Directions in CTBCM Determination for NPCC
40
No. GROUP OF ACTIONSStakeholders directly
involvedNo. GROUP OF ACTIONS
Stakeholders directly
involved
0Implementation Process Start; Overall
Decision and Actions; Coordination
MWP
NEPRA
CPPA G
10.1 Codes: New Market Commercial Code
CPPA G draft and
consultation,
NEPRA review and
approval.
1
Policy on market development, White
Paper describing the market conceptual
design
NEPRA;
CPPA G (draft);
MWP public consultation
and with other institutions,
10.2 Codes: Update Grid Code
NTDC and Grid Code
Review Panel.
NEPRA review and
approval.
2 Amendment to legal framework MWP with CPPA G support 11Strengthening of System Operator, enforce
rights and obligations NTDC and NPCC
3
Modifications to adapt or replace energy
policies to be consistent with the market
development policy
MWP 12Strengthening Discos credit worthiness and
readiness as market participants
Discos & MWP as the owner
of Discos
and
SPS
4
Modifications to power sector regulatory
framework to be consistent with the market
development policy
NEPRA. 13
Open access to transmission services:
formalize transmission services rights and
obligations
NTDC as Transmission
Network Owner
NPCC as System Operator.
5
Assignment of pre-existing PPAs/EPAs
signed or administered by CPPA G among
Discos
MWP and CPPA G,
IPPs and Gencos
Imports
Discos
14
NTDC as Planner (Least cost expansion
plan) and Metering Services Provider
(adequate revenue settlement meters)
NTDC,
NEPRA review and
approval of plan
CPPA G (as observer of
6Separation of CPPA G into Market Operator
and Special Wholesale Supplier FunctionsCPPA G 15
Measures to enhance wholesale payment
culture: credit cover mechanisms and
payment system
CPPA G/Market Operator
Discos
MWP
IAA
7Creation of the Market Operator as a
separate company
CPPA G in particular Market
Operator Business Unit16
Readiness for commercial operation of
electricity market:
Lead by CPPA G, includes
all market participants;
CPPA G reporting of
readiness tests and results
8Creation of the SPS as purchaser of not yet
not assigned PPA/EPA
CPPA G in particular SPS
Business Unit;
Discos
17Declaration of date to start commercial
operation of the market MWP
9
Creation of the Independent Auction
Administrator (IAA) and scheme for credit
cover / guarantees for low performing
Discos
MWP (PPIB);
CPPA G
Discos
Joint Secretary Power Finance
(Convener MIMG)
CPPA-G
MISC + Secretary MIMG as Member Executive
Management
NPCC NTDCDISCO’s
MIMG Member
NEPRA
Member Executive Management
Universities K-Electric Generators
Support Staff in MoE
www.cppa.gov.pk
Market Implementation Monitoring Group (MIMG)
Re-Operationalization
Level-1(MoE)
Level-2(CPPA & NEPRA)
Level-3(Relevant
Stakeholders)
To provide guidance and leadership
• Will be acting as PMO• Responsible for Monitoring,
Reporting & Coordination
• Channel the MIMG requests into the entity they are representing and vice versa • Produce the requested information in front of the MIMG• Coordinate the participation of experts of the represented entity in
meeting in which their participation is requested by MIMG
www.cppa.gov.pk
The Electricity Market
• A trading environment where multiple sellers trade with multiple buyers,
market products under specific rules.
• Service providers. What do they do?. Restrictions?
• Competition may apply in certain segments of the market. Which ones? Why?
• Why regulation still is necessary?
GateClosure
GateClosure
Bilateral Trading Centralized Trading Integrated with System Operation www.cppa.gov.pk
Pakistan’s Electricity Sector
Generators as Market Participants Transmission Service Provider NTDC
- DISCOs: Wire Business & Supplier - Participants as Retail Suppliers 10 DISCOs and KE
- Service Provider for wire business/distribution
- BPC > 1MW- Others non-eligible
customer
Wholesale Electricity Market Operator
www.cppa.gov.pk
www.cppa.gov.pk
Market Opening Benefits
• Stimulate appropriate infrastructure investments from private sector
• Competition provides customers with choices
• Achieve efficiency both in energy and economic terms
• Pressure on Price / Adequacy through competition
• Create the conditions for a fair allocation of risk and benefit sharing betweeninvestors/sellers and buyers/consumers
• Standard products traded in market enhancing liquidity
• Level the playing field; removing conflict of interest to facilitate entry of newinvestors and participation of private players, including Bulk Power Customers
• Ensure transparency and predictability
www.cppa.gov.pk
Market Design Objectives - CTBCM
(i) providing open access to all market participants on a non-discriminatory basis;
(ii) creating an environment to attract investment;
(iii) ensuring further evolution of wholesale market to advanced phases;
(iv) promoting competitive arrangements, both for and in the market;
(v) promoting payment discipline among market participants;
(vi) eliminating sovereign guarantees over time;
(vii) ensuring compatibility of principles for operation of retail market; and
(viii) creating an environment for compatibility / participation of regional electricity
market.
Review of existing Legal and Regulatory Framework
• Before proposing any model:• A thorough review of the existing legal and regulatory framework was undertaken• Peculiarities identified and discussed in detail• Various option analyzed to address different aspects of the model
• Review of the carved-in-stone PPAs and their integration with the market.• Forced market integration• Forced contract negotiation• Voluntary renegotiation• Adaptation of market rules• Virtual Generation / Managed Contracts• Contractual Buy-Outs
• Adaptation of Market Design and Virtual Generation option seemed more feasible• Also implemented in Alberta, Mexico etc.
www.cppa.gov.pk
www.cppa.gov.pk
CTBCM Concept
51
▪DISCOs will be allowed to sign new contracts bilaterally with Generators▪Existing PPAs between IPPs and NTDC/CPPA G (on behalf of DISCOs) will be converted will be commercially allocated to DISCOs and administered by SPT DISCOs
Plus a Balancing Mechanism to settle contract deviations
CPPA G
MO SPS IAA
www.cppa.gov.pk
CPPA G Transition to the CTBCM
CPPA G
1. Settlement and
Invoicing
2. Procurement from
PPAs (Agent)
3. New Capacity
Procurement
Market Operator:
centralized market services
Special Purpose Suplier: non
“bilateralized “PPAs procurement
Independent Auctions Administrator:
new capacity procurement facilitator
Ring fence Legal
www.cppa.gov.pk
Bilateral Contract Market with Balancing Mechanism
DGBilateral Contracts
Settlement and Payments
MO
Sale / Purchase Differences
Ph
ysical differen
cesP
hys
ical
dif
fere
nce
s
Invoicing and Payments
Balancing Mechanism
Bilateral Market
www.cppa.gov.pk
New Market Model – Features
Capacity Obligations
Non Payment Risks
Grid CodeCommercial Code, others
BME & BMC
Contract Registrar
Centralized New Capacity Procurement
Service Providers
K ElectricMarket
Participants
New PPAs
Competition for and in the
Market
Existing PPAs
Credit Cover (collateral)
Low Performing
Discos
Agent separated from MO
Centralized Economic Dispatch
MO
Moving from Single Buyer towards Bilateral Contracts
• In an Electricity Market, whenever there is more than one buyer, there will be imbalances
• These imbalances are settled through Balancing Mechanism
55www.cppa.gov.pk
Balancing Mechanism
• The Balancing Mechanism is a process of clearing the deviations of the market participants from the contract values
• Alternatively, the Balancing Mechanism can also be defined as the process of measuring the imbalance among the contracted quantities and actually Generated/demanded quantities and clearing those imbalances using certain prices.
• The establishment of a balancing mechanism is a pre-requisite for a competitive bilateral market in Electricity
www.cppa.gov.pk
Types of Balancing Mechanisms Proposed in CTBCM
• There two types of Balancing Mechanisms proposed in the CTBCM• Balancing Mechanism for Energy (BME)• Balancing Mechanism for Capacity (BMC)
• The BME is designed to clear the imbalances in the Energy Market. The BME always leads to zero sum.
• The BME measure the differences among contracted energy and actually Generated/demanded energy (MWh) and clears the differences at a price i.e. marginal price
• The BMC is designed to clear the imbalances in the Capacity Market. The BMC doesn’t always leads to zero sum.
• The BMC measures the differences among contracted capacity and Actual available Capacity/Actual demand(MW) and clears the differences at a price.
www.cppa.gov.pk
59
Types of Supply Contracts
• Participation in the BME/BMC depends on the type of contract
• Three types of Supply contracts are discussed here• Generation Following Supply Contracts• Load Following Supply Contracts• Financial Contracts with fixed quantities• Capacity & Associated Energy Supply Contracts• Capacity only Supply Contracts.
www.cppa.gov.pk
Integrated Electricity Market Simulation Model (IE-MSM)
• CPPA-G has been working on the state of the art tool to simulate the future operation of the power system
• Detailed modelling has been completed and marginal cost and indicative total costs of the market calculated
• Simulation of Contracts: An inhouse tool developed for simulation of the future contracts based on the results of the simulation tool
www.cppa.gov.pk
-
50
100
150
200
250
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Ener
gy (
TWh
)
Hydro PV Wind Nuclear Bagasse Indg. Gas RLNG Imp. Coal Dom. Coal RFO
0
2
4
6
8
10
12
14
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
SRMC (Rs/kWh) Per Unit Avg VC (Rs/kWh)
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Rs/
KW
h
Per Unit VC Rs/KWh Per Unit FC Rs/KWh Per Unit Total Rs/KWh
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Gen
erat
ion
(G
Wh
)
PV Wind
www.cppa.gov.pk
Marginal Cost
0
2
4
6
8
10
12
14
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
RS/
KWH
SRMC - Annual
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1 2 3 4 5 6 7 8 9 10 11 12
Mill
ion
PK
R
(Year)
Income-PPA Income-LF Contract Income-LF Contract Avg
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 8500
Solar Wind Hydro Biomass
Long and Medium
Term Demand
Forecast
Short Term Demand
Forecast
Transmission Network
Candidate Plants
(Investment Data)
Existing Generation
Fleet (Operational
Data)
Other Inputs
Market Price Discovery and Projection
** SDDP licenses acquired
* WASP, OptGen, Plexos
*** NCP
NTDC NPCCCPPA NPCC
Long, Medium and Short Term Tools
Outputs
IGCEP*Price
Projections*Unit
Commitment***
Dispatch
Optimization*
Long Term Medium Term Short Term
Market Simulations-SDDP• SDDP (Stochastic Dual Dynamic Programming) is
state of the art dispatch optimization tool• Developed by PSR Brazil (a renowned consultant in
Energy Modelling and cost optimization)• Used in more than 70 countries• Inputs:
• Demand (PMS and Regression) prepared by DISCOs and NTDC
• Existing System (Installed Capacity with other techno-economic data)
• Future Expansion (IGCEP) prepared by NTDC
• Output:• Generation Cost (Fuel+Variable O&M) based on optimal
dispatch• Marginal Price in the System• Total cost of the system (calculated outside the tool
Marginal Cost
Total Generation Cost
www.cppa.gov.pk
Firm Capacity Factor of VRE Plants
• Firm Capacity Factor or Capacity Value is a widely used metric of performance of an
electricity generation resource.
• Different kind of analyses are done worldwide to estimate / allocate a capacity factor
to VRE sources in order to consider them for resource adequacy1.
• Markets that allocate firm capacity factor to VREs:
• PJM, ISO-NE, NYISO, MISO etc…
• FCAT – a tool developed to estimate firm capacity of PV and Wind generation in our
system according to two methods
• (i) peak hours load
• (ii) most thermal requirement hours
www.cppa.gov.pk
Firm Capacity Allocation Tool - FCAT
• An excel based tool designed to simulate the contribution of intermittent resources to
the security of system.
• The tool is capable to calculate the average contribution of intermittent resources to
the security of the system under different assumptions.
• In this first analyses, two techniques have been used to determine the contribution of
VRE in the capacity required to met demand.
• The purpose of this analysis and tool is to evaluate different options and to select the
one option that better suits the technical as well as commercial objectives in the
market
• (Results on next slide)
www.cppa.gov.pk
Allocation of PPAs
• GoP decision to transform the power sector of Pakistan from Single Buyer to Competitive
structure.
• This transformation requires that the contracts that have been signed by a single buyer i.e.
CPPA-G at present (previously by NTDC and WAPDA) on behalf of demand representing
entities (DISCOs at present) be bilateral-zed.
• Factors to be considered for bilateralization of contracts
• Share of each DISCO based on capacity, energy, load factor, historical vs future patterns etc.
• To find an optimum way to cater for such questions, an excel based tool is developed by
CPPA-G known as the Electricity Cost Allocation Tool (ECAT)
www.cppa.gov.pk
Electricity Cost Allocation Tool - ECAT
• ECAT is an excel based tool which, given the demand (energy and peak demand)
inputs (historical and forecasted) for each DISCO and KE and the expected system
costs, is able to:
• Calculate the per-DISCO charges of the current allocation scheme
• Scenarios based allocation factors for energy and capacity
• Expected energy imbalances and price of imbalance
• As a summary, the tool can help the user to quantitatively measure the impact of the
different allocation methodologies assumed on a per-DISCO basis.
Market Contracts Analysis Tool• Financial Analysis is required before making any investment
• PPAs with Secured Payments-doesn’t face market price risk
• Market Based contracts incorporate risk factors-Face Market Price volatility risk
• Marginal Price is used as reference to assess the revenue availability in the market
• Basic Principle: In a perfectly functioning market, the recovery of all revenues through marginal price in each period shall be enough to cover all costs and ensure sufficient return on investment• If this is the case, Generators can consider to enter as merchant
• In not, will look for other sources of revenues
75
Types of Contracts
• Participation in the BME/BMC depends on the type of contract
• Three types of contracts are discussed here• Generation Following Contracts
• Load Following Contracts
• Supply Contracts with Fixed Quantities
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Approval of Wholesale Market Design
Competition for the Market
Competition in the Market
Alignment of Framework (Regulations)
Legal Constitution NEPRA Act 2018 Electricity Act 1910
PolicyNational Electricity
Policy & PlanPower Policy 2013 1994, 2002, 2015
RegulatoryMarket Rules, Power Procurement Rules
Grid, Commercial and Distribution Codes
Wheeling, Competitive Bidding, Import Regulations
Generation IPPs Public Sector K-Electric
TransmissionTransmission Network
Operator (TNO)System
Operator (SO)Planner
Metering Service Provider
System
OperatorSupply = Demand Operational Planning
MarketOperator
Agency Role Billing & SettlementMarket & Product
Development
DistributionDistribution Wire
Business (Regulated)Sales or Supply Business
(Competition)Metering Service
Provider (Regulated)
Markets Transition Single Buyer Single Buyer PlusCompetitive
Wholesale & Retail
Paki
stan
’s E
lect
rici
ty M
arke
t Fr
amew
ork
Market Transition within a Framework
Vertically Integrated
Alignment of Legal Policy & Regulatory Framework
Alignment of Institutional Roles & Responsibilities
20172023-2025
NewNEPRA Act,includingMarket Law
2020
• Market based contracts are implemented
• BPC threshold reduced that enhances retail competition
• A separate roadmap to bifurcate DISCOs licenses implemented
• The capacity in long-term PPAs will also come in balance
2018-2020
• Wheeling arrangementsunder NEPRA 2016 Regulations make operational
• Roadmap for developing wholesale market implemented
• Competitive Wholesale Market starts with a Balancing Mechanism
• Provides the Market Price• Retail Competition for
BPC can also commence
2020 -2023
• Electronic Trading Platform for Bilateral Trading may start
• At the same time Reverse E-auctions may commence
2026 onwards
• Evolution in to Spot Market
Completive Power Market Stages Planned
Lack of an agreed “best practice” design of the markets
Central clearing in a pool
Nodal prices
Capacity and energy market
ISO + independent trans. firms
Financial rights point-to-point
Bilateral markets
Single /zonal prices
Energy only
TSO + Power exchanges
Physical rights on flowgates
And others And others
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Progress Update on Market Development
Most Important & Most Difficult to
Build a Common Vision and Recruit People:
• Collaboration with LUMS
• International Trainers Engaged
• International Collaboration
• Numerous consultations
• Communication through media
Computer & Communication Monster (C&C):
• Wholesale smart metering project underway
• Automation of SO and MO process 80% complete
• SCADA upgrade underway
• Dispatch optimization & simulation tools implemented
• DISCOs IT roadmap also prepared
Transition requires alignment of whole legal,
policy, regulatory and institutional alignment:
• Act amended and provide legal basis
• Market Model and Roadmap under approval
• Market Development Policy proposed
• Regulations are under review
• Institutional re-structuring underway
Market Operator is leading the design and
implementation program:
• Central facilitation and lead role
• Market Implementation Support Committee
• PMO office in CPPA
• Electricity Market Team (EMT)
People Technology
Process Central Lead Role
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New Market: Challenges
New Culture New HR Approach
New Capacities New Accountability
New Technologies New Efficiency
NEPRA - CPPA
Key role
PromotingMonitoringCoordinatingTraining Disseminating
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Information Publishing: Marginal Cost
0
2
4
6
8
10
12
14
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
RS/
KWH
SRMC - Annual
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Market will not solve all Issues
o Market will not solve all the issues
o Will create pressure to improve business across the supply chain
to improve on:
o Demand forecasts
o Generation Planning
o Optimized Dispatch
o Data Institutionalization & Publishing
o Improved Transmission Network (publishing prices with and without
constraints)
o Re-structuring MO
o Aligned and predictable legal and regulatory framework
o Market contracts & Transparency
o Strengthening SO, DISCOs etc…..
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Recommendations / Next Steps/ Take-aways
o Work together.
o Form Associations
o Form working groups
o Consultations
o Cpapcity Building
o Cooperation
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NPCC• Strengthening of System Operator in terms of people, process and technology
• Improvement in process and structure
• Data Institutionalization, IT Applications and Systems
• Improvement in Unit Commitment and Dispatch Functions, Forecasting and other allied Technical Functions
• Capacity Building of SO to Participate in CTBCM
• Plan for Obtaining System Operator License
• Formation of Joint Working Group
Actions to be covered in Detailed Implementation Plan
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NTDC• Grid Code Amendment
• Connection Agreements
• SMS Metering on the CDPs
• Data Institutionalization
• Strengthening of Demand Forecasting Function
• Strengthening of Generation and Transmission Planning
• Capacity Building for Market Readiness
• Formation of Joint Working Group
Action to be covered in Detailed Implementation Plan
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DISCOs1. Market Implementation Groups to formation of Market Interface Departments
• Strengthening of Demand Forecasting Function and Transmission Planning
• Capacity Building on Management of Bilateral Contracts Portfolio
2. Financial Health Assessment of DISCOs and work on (a) arrangement of Bank Guarantees and credit covers for good performing DISCOs and (b) for low performing DISCOs enable AEDB/PPIB as IAA to work out details of guarantees or credit covers
3. Participation in Commercial Allocation of PPAs
4. Connection Agreement preparation
5. Transmission Plan Preparation
6. Creation of Association of DISCOs
7. Participate in Market Capacity Building Sessions
8. Detailed Report on immediate interventions required by DISCOs for CTBCM implementation [within 80 days]
Actions to be covered in Detailed Implementation Plan
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AEDB/PPIB
1. Creation of Joint Working Group (PPIB & AEDB)
2. Strengthening of PPIB/AEBD to prepare them for IAA Function
3. Gap analysis of existing HR capacity, processes and IT Systems
4. Registration with NEPRA under NEPRA Act for IAA Function
5. Analysis of security package as a whole in conjunction with approved CTBCM Model and identification of Actions and its approval
Actions to be covered in Detailed Implementation Plan
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MoE (PD)
1. Formation of Joint Working Groups
2. Promulgation of the National Electricity Policy
3. Review and modification of the existing Power Policies
4. Review and modification of the existing Transmission Policies
5. Registration with NEPRA under NEPRA Act for IAA Function
6. Analysis of security package as a whole in conjunction with approved CTBCM Model and identification of Actions and its approval
7. Modification in Existing Rules and New Rules
8. Actions on the Institutional Roles, IAA Formation, SO License etc.
Actions to be covered in Detailed Implementation Plan
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NEPRA
1. Formation of Joint Working Groups
2. Approval of Updated CTBCM Implementation Roadmap and Detailed Design
3. Review and modification of the existing Regulations and new Regulations
4. Review and modification of the existing Guidelines, Codes, SOPs etc. for alignment with approved market model
Actions to be covered in Detailed Implementation Plan