The ministry of power has said the Phase 1 of Market-Based Economic Despatch (MBED) is set to be implemented from April 1, 2022, a move that is proposed to bring down the cost of power for distribution companies and consumers.
Significance of the move
• The ministry of power has been examining suitable mechanisms to enhance competition in the power sector with the objective of lowering the cost of electricity to consumers.
• With success in generation capacity additions over the past few years and a well-integrated national electricity grid, the time is right to move towards optimising the operation of generating plants in the country to deliver benefits of reduced operating costs to the distribution utilities and end consumers.
• The MBED will ensure that the cheapest (power) generating resources across the country are despatched (supplied) 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 significant annual savings for the electricity consumers, the ministry said.
• Around 5 per cent reduction in the cost of power to the consumers from MBED is expected.
• A robust day-ahead market will also form the basis for transitioning away from the country’s over-dependence on longer-term PPAs (power purchase agreement) to sustainable market-based operations.
• A consensual and phased approach in implementing MBED will help participants, power exchanges and load despatch centres to adapt gradually to the new regime.
• This is in line with the draft National Electricity Policy (NEP) 2021, which aims to more than double the penetration of short-term power markets by 2023–2024.
• An essential next step in reforming electricity market operations and in moving towards the ‘One Nation, One Grid, One Frequency, One Price’ framework is to implement MBED in the day-ahead horizon, initiated by the Central Electricity Regulatory Commission (CERC).
• The CERC will align their regulations and mock drills will be carried out to ensure that the system runs smoothly.