Green energy trade on exchanges mostly depends on the availability of merchant power with developers. In rare cases, large power project developer trades the surplus capacities at the power exchanges, because their capacities are tied up in power purchase agreements with government. Year 2023 has been a year full of unusual seasonal changes with untimely monsoons, flooding in some parts of the country and rainfall deficit in others. Hydropower generations has a key role in providing the base load capacity and projects with pondage / storage also help manage peak demand, thereby helping stabilize the electricity prices for consumers at the exchanges.

The green energy market segment at the IEX has witnessed a 48% YoY dip between July and September. Renewable energy trading at the Indian Energy Exchange in 2023 so far has seen a considerable drop compared to year 2022, with the traded energy reaching its lowest in October 2023 at 188 million power units. The increasing power demand and the drop in renewable generation have forced entities to trade mostly on the conventional electricity market, in turn reducing the buy bids in the green market segments. The Green market have been trending low with frequent fluctuation in the average trading prices. The drop in power generation from solar and wind sources this year has translated to reduced supply in the green energy markets, where volumes have come down and prices have increased.

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With a much lower than expected rainfall, especially during August and September, hydropower availability was limited. This also shows through the constrained supply and high prices during August. While hydropower has been at its lowest, wind generation has also taken a hit over the last few months due to a lean season. With solar mostly tied up in long-term PPAs, the market depends on hydropower because of its round the clock power generation.

Hydropower has dropped because of the flooding situation in Himachal Pradesh, destroying projects in the region, which supply power to consumers in Delhi and Uttar Pradesh and the stream of power to trade at the exchanges. Solar capacity is very minimal when it comes to merchant power projects; it mostly depends on wind, hydro, or biomass-generated power.

The recent emergency provisions invoked by Karnataka under Section 11 of the Electricity Act, compelling all generating stations, including the private ones, to supply the generated power to the government, as one of the reasons for the drop in renewable energy traded at the Exchange. Much of its impact is also coming from Karnataka and almost 300MW private renewable energy projects have been diverted to the state, leading to a sudden drop from October onwards. With the buy-side liquidity declining in the green market segments, generators have turned to the market for most of their trades.

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Ultimately, it is the sale rate realisation that matters. RE or non-RE, no one cares. Most of the traders are selling under the dam market, which has both conventional as well as RE buy bids. Even with the impact of the transmission charges, the trade makes business sense because the delta difference is still far better. In RE segment, it is always better to sale online, as they cannot store the power, the real-time power market has also helped to manage this load. The IEX traded 24.07BU from the conventional power market, compared to 747.64MU from the green market segment during the second quarter of the financial year 2023.

Green power has usually drawn a premium over conventional power. We have all seen the substantial increase in demand coupled with intermittent fuel supply side issues leading to substantial increases in the green power prices several times during the course of the years.

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About the author: CA Yogesh Birla
CA Yogesh Birla
CA Yogesh Birla is Director of Mumbai-based Birla Solar Project Company. A top Ranker Chartered Accountant with an experience of more than 25 years into Investment Banking with expertise into solar power projects and green energy asset management for clients across the world. He is renowned speaker on various industry, trade and government platforms, where his love of sharing knowledge is evident by renowned investors and family investment offices. The views expressed are not any investment advice. The author can be reached at [email protected]

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