Trading at Power Exchange - IEX

February 2016

Prasanna Rao Market Operations

In this presentation

Product Portfolio

Trading Mechanism & Process Flow-

Day-Ahead Market

Trading Mechanism-Term-Ahead Market

Trading Mechanism-REC Market

Risk Management

Product Portfolio

Intra Day REC

IEX Market Segments Delivery-based Contracts

Day-Ahead Market since June,08

Closed , Double-sided Auction 10-12 am bidding Each 15-min block , 0.1 MW min NOC required

Term-Ahead Market since Sep,09

Extended Markets introduced 20th July’15

Day-Ahead Contingency – Another window for Day-Ahead. Extended Market: Trading window increased to 1500-2300 Hours

Intra-Day -Extended Market: Trading window increased to

0030 – 2000 Hrs for same day delivery, with delivery starting at 0400 Hours

Daily- for rolling seven days (delivery starting after 4 days)

Weekly- for 1 week (Monday-Sunday)

Renewable Energy Certificates since Feb,11

Next… Energy Saving Certificates

Green Attributes as Certificates Sellers : RE generators not under feed in tariffs Buyers: Obligated entities 1MWh equivalent to 1 REC

Auction

Continuous

ELECTRICITY

CERTS

BID MATCHING

Open/Closed Auction

Orders accumulated during call phase (no matching)

Orders matched after call period

Orders are used for calculation common price

i.e. Equilibrium Price.

All successful orders matched at Equilibrium

Price.

Continuous Trading

Price-time priority based continuous matching

The highest Buy order & lowest Sell order gets the

priority

If the prices are same then priority is given to the time

of the order received.

Day Ahead Market (DAM)

Term Ahead Market (TAM)

Renewable Energy Certificates (RECs)

Trade for the following day

Contracts for every 15 min, closed auction

From 3 Hrs ahead to 11 days in advance

4 types of contracts

•Intraday •Day Ahead Contingency •Daily •Weekly

Trade green attributes of electricity

1 REC = 1 MWh of green energy

Product Segments

Contract Characteristic

Delivery

Auction Type

Contracts

Trade Availability

Financial Settlement

Day Ahead Market

Next day

Closed Auction

15 min

All Days

Pay-In- D-1; Pay Out – D+1

Intraday Contracts

0400-2400 Hrs same day

Continuous trading

Hourly

All days

0030-2000

Pay in: T+1

Pay out: T+1

Day Ahead Contingency

For next day

Continuous trading

Hourly

All Days;

1500-2300

Pay in: T+1

Pay out: T+2

Daily Contracts

From 4th day to next 7 days

Continuous trading

Block of Hours (Fixed)

All Days;

1200-1500

Pay-In- D-1; Pay Out – D+1

Weekly Contracts

For next week

Open Auction

Block of Hours (Fixed)

Wed & Thurs;

1200-1600

Pay-In- D-1; Pay Out – D+1

TERM AHEAD MARKET

Contract Characteristics

T = Trade, D = Delivery

DAM and TAM Trading Timeline

Trading Mechanism & Process Flow-

Day-Ahead Market

• Nation-wide, on-line, automated

• Double-sided closed auction system

• 15.min block day-ahead contracts (MWh)

• Physical delivery based

• Central counter party: IEX

• Equilibrium price for 15 min time block (Rs./MWh)

• 15 min block volumes/prices published

• Pool based (collective) scheduling of traded power by NLDC (POSOCO)

Auctioned Day-Ahead Market

P

Q

Supply

Demand

P*

Q*

Buyer’s Surplus

Seller’s Surplus

P* - Cleared Price Q* Cleared/Traded Volume

Features of Day Ahead Market

A closed double-sided anonymous auction for each 15-min time block for the following day

The intersection between the aggregated sale and purchase curves defines the market clearing price (MCP)

12 Bid area defined

Congestion Management through market splitting and determining Area Clearing Price (ACP) specific to an area

Bid types: Single Orders or Block Orders

Minimum bid=Re.1 for 0.1MW

Minimum Price & Volume Step = 0.1p * 0.1 MW

12 Bid Areas

N1

N2

A2

A1

W3

E2

E1

N3

W2

W1

N2

S2

S1

DAM trading process

Bidding Matching Review corridor

and funds availability

Result Confirmation Scheduling

Bids for 15- min each or

block bids can be placed

MCP &MCV

calculated

Corridor availability and funds verified

Collective transaction

confirmation by NLDC

Final Schedule sent

to RLDC for incorporation

Final ACV and ACP

calculated. Market

splitting if congestion

10:00 am to 12:00 pm

12:00 pm to 1:00 pm

1:00 pm to 2:00 pm

3:00 pm 5:30 pm 6:00 pm

Bid Types

• Bids for each 15 min can be entered

• Varying price and quantum pairs

• Allow partial execution

Single/Portfolio Bid

• Relational Block Bid for any 15 min

• Mother or child bid

• No circular links

• No partial execution

Block Bid

SELL

BUY

Q*

P*

Pri

ce

Quantum 0

The perfectly liquid, frictionless market solution

AUCTION

O

The Batching of Customer Orders

•

O

•

• O

• O

• O

5000

4000

3000

2000

1000

6000

How should these orders be integrated ?

10 20 30 40 50 60

O

• Sell

Buy

Pri

ce(R

s/M

Wh

)

Quantum(MWh)

Aggregate the Buy Orders

• (10)

• (30+10=40)

• (40+10=50)

• (50+10=60)

•

•

•

•

•

• (10+20=30)

5000

4000

3000

2000

1000

6000

10 20 30 40 50 60

Pri

ce(R

s/M

Wh

)

Quantum(MWh)

• Individual buy order

Cumulated buy orders at the price or better

Aggregate the Sell Orders

O (10)

O (10+10=20)

O (20+10=30)

O (30+10=40) 5000

4000

3000

2000

1000

6000

10 20 30 40 50 60

Pri

ce(R

s/M

Wh

)

Quantum(MWh)

o Individual sell order

o Cumulated sell orders at the price or better

o

o

o

o

o O (40+10=50)

Match Aggregated Buy & Sell Orders

O

O

O

O

O

Cumulated Sell Orders

P* =

5000

4000

3000

2000

1000

6000

10 20 30 40 50 60

4000

30 Quantum(MWh)

Pri

ce(R

s/M

Wh

)

•

•

• •

•

Cumulated Buy Orders

Q*

=

Understanding of Single Bid

Sell Bid: One or more quantity-price pairs, each specifying the minimum

price at which the participant is willing to sell the corresponding quantity of

electricity and are submitted independently for each delivery period

i.e. 15 min block.

Buy Bid: One or more quantity-price pairs, each specifying the maximum

price at which the participant is willing to buy the corresponding

quantity of electricity and are submitted independently for each delivery period i.e. 15 min block.

Understanding of Block Bid

A block bid is used for the procurement or sale of power which is specific to a block of hours (e.g. base

load, peak or user defined). A block bid can either be a buy order or a sale order for a block of hours.

Either all hours of the block order are jointly successful or all of these block hours are jointly rejected.

A block bid is selected if the bid price is better than the average system price of power in respective

block hours.

Example of Sell Block Bid:-

Selection Criteria:- A sell (respectively buy) bid is said to be selected if the submission price of the bid

is below (respectively above) the average system price.

Result for 1st Block Bid-

E5 at 5000 for 50 MW Sell is at below price than Average Price of Rs. 5875.90; hence will be selected.

Result for 2nd Block Bid-

E6 at 7000 for 50 MW Sell is at above price than Average Price of Rs. 5875.90; hence will be rejected.

System Price:-

Illustration of Price Matching and

Market Splitting

• Two regions have been considered i.e. ER and SR.

• Four Sellers and Two Buyers in a 15-Min Block are taken with following Bid Scenario: -

Quantity (MW) Price (Rs./MWhr)

ER Seller-1 200 2000

ER Seller-2 100 3000

SR Seller-1 100 3000

SR Seller-2 100 4000

SR Buyer 300 4000

ER Buyer 100 3000

ER REGION

200 MW @2000 100 MW@3000

100 MW @3000

SR REGION

100 MW @3000 100 MW@4000

300 MW @4000

Seller Seller Seller Seller

Buyer Buyer

(200,2000)

Understanding Provisional Unconstrained Price Matching ER Seller-1

200 MW@ 2000/MWhr

ER Seller-2 100 MW@

3000/MWhr

SR Seller-1 100 MW@

3000/MWhr

SR Seller-2 100 MW@

4000/MWhr

SR Buyer 300 MW@

4000/MWhr

ER Buyer 100 MW@

3000/MWhr

(200,2000)

(400,3000)

(200,2000)

(400,3000)

(500,4000)

(300,4000)

(200,2000)

(400,3000)

(500,4000)

(200,2000)

(400,3000)

(500,4000)

(300,4000)

(400,3000)

Market Clearing Price (MCP)= Rs. 3000/MWhr Market Clearing Volume(MCV)= 400 MW

2998

2999

3000

3001

3002

3003

3004

3005

150 200 250 300 350 400

Total Buy (MW) Total Sell (MW)

Demand-Supply intersection with high resolution

Price 3000

Buy Quantity 400.00

Sell Quantity 400.00

SR ER

Net Demand 100

Net Supply 300

Net Supply 100

Net Demand 300

Net 100 – 300 = -200 Net 300-100 =200

Demand and Supply gap in two regions get balanced by unconstrained flow between the two regions hence a common MCP is derived.

REQUIREMENT OF CORRIDOR FROM NLDC

Net Required Flow- 200 MW

ER REGION

200 MW 100 MW

100 MW

SR REGION

100 MW 0 MW

300 MW

Seller Seller Seller Seller

Buyer Buyer

Constraint Solution (Market Splitting)

Congestion was reported by NLDC from ER to SR corridor and flow is constrained to 100MW. Due to flow constraint, system will “Split” the market in to two regions i.e. Deficit (SR Region) and Surplus region (ER Region),and will again run the calculation chronology for both the regions separately considering the flow constraint and will derive the ACP and ACV.

ER-Surplus Region

Price

(Rs./kWh) 0 999 1000 1999 2000 2999 3000 3001 3999 4000 4001 6000 8000 10000 20000

ER Seller-1 0 0 0 0 -200 -200 -200 -200 -200 -200 -200 -200 -200 -200 -200

ER Seller-2 0 0 0 0 0 0 -100 -100 -100 -100 -100 -100 -100 -100 -100

ER Buyer 100 100 100 100 100 100 100 0 0 0 0 0 0 0 0

Net (Buy-Sell) 100 100 100 100 -100 -100 -200 -300 -300 -300 -300 -300 -300 -300 -300

Flow Towards SR of 100 MW

SR-Deficit Region

Price

(Rs./kWh) 0 999 1000 1999 2000 2999 3000 3001 3999 4000 4001 6000 8000 10000 20000

SR Seller-1 0 0 0 0 0 0 -100 -100 -100 -100 -100 -100 -100 -100 -100

SR Seller-2 0 0 0 0 0 0 0 0 0 -100 -100 -100 -100 -100 -100

SR Buyer 300 300 300 300 300 300 300 300 300 300 0 0 0 0 0

Net (Buy-Sell) 300 300 300 300 300 300 200 200 200 100 -200 -200 -200 -200 -200

ER Surplus Region Demand-Supply Curve

SR Deficit Region Demand-Supply Curve

Payment Settlement

ER Buy (on Trade Date) ER Sell (on Trade Date+2)

IEX

ER Seller 1 Sell 200 MW @ Rs

2500/MWh=Rs. 5 Lac ER Buyer Buy 100 MW @ RS

2500/MWh=Rs. 2.5 Lac

SR Sell (on Trade Date +2) SR Buy (on Trade Date)

SR Buyer Buy 300 MW @ Rs.

4000/MWH=Rs. 12 Lac

SR Seller 1 Sell 100 MW @ Rs

4000/MWh=Rs. 4 Lac

SR Seller 2 Sell 100 MW @ Rs

4000/MWh=Rs. 4 Lac

Total Pay-in

Received from

Buyers

Rs. 14.5 Lacs

Total Pay-out

Given to

Sellers

Rs. 13 Lacs

Congestion

Revenue

Rs. 1.5 Lacs

Open Access: What a consumer pays Charges

• Inter-State Transmission charges payable by the open access consumer

PoC charges

• Payable to the state transmission utility for the use of the transmission system for availing power through open access.

Transmission Charges or STU Charges

• Charge to the Discom for conveyance of electricity through open access as determined by the SERCs

Wheeling charges

• Subsidising open access consumer has to pay a cross subsidy surcharge to the Discom.

Cross Subsidy Surcharge

• Additional Charges, if any

• NLDC application fee, scheduling and operating charges, SLDC Charges

• IEX transaction charges/Trading Margin

Others

• Both Buyers and Sellers to absorb losses

• Average Transmission Losses of the Region where the Entity is geographically located.

Treatment of Losses

Draw less than contracted power

(Contracted Power – losses)

Inject more than contracted power

(Contracted Power + Losses)

Buyer

Seller

Term-Ahead Market

Price Discovery and Bidding

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Term Ahead Market-Bilateral Transaction

BID MATCHING

Open/Closed Auction

Orders accumulated during call phase (no matching)

Orders matched after call period

Orders are used for calculation common price

i.e. Equilibrium Price.

All successful orders matched at Equilibrium

Price.

Continuous Trading

Price-time priority based continuous matching

The highest Buy order & lowest Sell order gets the

priority

If the prices are same then priority is given to the time

of the order received.

TAM Market Segments

Open Auction Continuous

Continuous Continuous

Regional Daily, Day-Ahead and Intra-Day CONTINUOUS TRADING PROCESS

TWS Screen

Pending Buy Order Pending Sell Order

Buy 10 MW @ Rs 4500/MWh Sell 15 MW @ Rs 5500/MWh

Sell 15 MW @ RS 5500/MWh Buy 10 MW @ Rs 4500/MWh

Trading Engine

Buy 10 MW @ RS 4500/MWh Sell 15 MW @ RS 5500/MWh

TWS Screen

Pending Buy Order Pending Sell Order

Buy 10 MW @ 5000/MWh

Sell 15 MW @ Rs 5500/MWh Buy 10 MW @ 4500

Trading Engine

Buy 10 MW @ RS 5000/MWh

Buy 10 MW @ RS 5000/MWh

Buy 10 MW @ RS 4500/MWh

Sell 15 MWh @ 5500

TWS Screen

Pending Buy Order Pending Sell Order

Sell 15 MW @ RS 5000/MWh

Sell 15 MW @ 5500

Trading Engine

Sell 15 MW @ Rs 5000/MWh

Buy 10 MW @ 5000

Buy 10 MW @ 4500

Sell 15 MW @ 5500 Sell 5 MW @ Rs 5000/MWh

Trade 10 MW @ RS 5000/MWh

Buy 10 MW @ RS 4500/MWH

Bid Modified

Renewable Energy

Certificates

REC Mechanism

ACCREDITION (Through State nodal Agency)

• SNA authorises the RE Generator and recommends for Registration

REGISTRATION (Through Central Agency NLDC)

• NLDC registers it as eligible entitiy

ISSUANCE (Through Central Agency NLDC)

• Entity received RECs for the amount of electricity injected in to the grid as certified by SLDC

TRADING & REDEMPTION(Through PXs)

Trading at IEX

Trading Day Last Wednesday of every Month

Market Clearing Closed Double sided auction

Trading Time 1300-1500 Hrs

By 1530 Hrs Verification by Central agency for Valid REC by cleared seller at IEX

By 1600 Hrs Central agency confirms REC

By 1630 Hrs IEX finalizes trade

By 1700 Hrs Buyer & Sellers informed to Central Agency

By 1800 Hrs Invoice raised (proof of REC trade)

Risk Management

Surveillance

Surveillance

Checking of Collateral (Automated)

Checking of Permissible Quantity (Automated)

Deviation from Bidding Pattern

Surveillance team informs members about the deviation for their correction

Daily MIS reporting

Coordination with CnS for Bank files

All new settlement account details received from membership department are confirmed with the clearing banks before updating in the back office software

Instruction to banks for mapping the settlement account for ABB/ ABF files based on whether it is member or client settlement account

Recovery of client fees based on instruction from membership department

Settlement Account Mapping & Client Fees Recovery

Bank Blockage (DAM)

In this case balance will be blocked by the bank at 9.00 am and will be unblocked after the final pay in is done by 3.30 pm. Based on balance communicated exposure for bidding will be determined in the trading system. With this facility member would not be required to keep additional margins

with the exchange.

7 Days Average Turnover(DAM)

Exchange on daily basis compute minimum margin that should be available. This will be average value of trades of

respective member for last seven day, In case if the average value is more than the available initial margins with the

exchange then member has to bring the difference in the form of additional deposit .

Initial Margin (TAM)

This margin provides the exposure to be given to a respective member, before a member wants to trade on IEX’s platform he needs to provide 5%

of his trade in cash as initial margin.

Special Margin(DAM&TAM)

The Exchange may collect any ad hoc margins from time to time in case if it feels that the available margins collected by the exchange are inadequate

due to variation in the prices in the Market

Basis Margin (TAM)

Basis Margin will be computed as a percentage of the traded value as per the risk curve defined and will be

collected in different trenches as per the contract specifications. Only the buyer Members will have to pay the

Additional Margin to the exchange based on their trade confirmation. Member will have to make available the

Additional Margin before the end of the trading day

Margining Component

Risk Management in DAM/TAM Proprietary/Trading Licensee

Members Professional Members

Initial Margin Basis/Additional Margin

Initial Margin Basis/Additional Margin

Day-Ahead Market

Margin equal to Last 7 Days Average of Buy turnover

As per Bank Balance including Hair Cut Factor

TAM-Intraday 105% of order - 105% of order Value -

TAM-DAC 100% of order Value

- 100% of order Value -

TAM-Daily 5% of order Value 50% of Trade Value

5% of order Value 50% of Trade Value

TAM-Weekly 5% of order Value 50% of Trade Value

5% of order Value 50% of Trade Value

REC 100% of order Value

- 100% of order Value -

Member Client RMS

Credit facility can be provided by Trader Member to their clients

No credit or funding facility by Professional Members to their clients

Timelines for payment of Charges: DAM/TAM

NLDC

Charges

• Application Fees is paid in advance = T

• NLDC Scheduling & Operational Charges is paid on T+1

• Transmission Charges CTU is paid on T+1

SLDC

Charges

• SLDC Scheduling & Operational Charges is paid on T+1

• Transmission Charges STU is paid on T+1

• Area Transmission Charges (ATU) is paid on T+1

• Area Load Dispatch Centre (ALDC) is paid on T+1

RLDC

Charges

• Application Fees/PoC/SLDC/RLDC charges is paid on Within 3 working days of Acceptance

T = Trade Date

Best Power Exchange in India – Enertia Awards ’14, ’13 &’12 – India Power Award 2014 – Power Business View 2014

Inc India Innovative 100 Award for ‘Innovation in Product and Technology’

Best Performing Power Exchange – Power Line Awards ’13 & ‘12

Best E-enabled consumer platform – India Power Awards ‘09

Thank You for your attention www.iexindia.com