DEREGULATED POWER SYSTEM

Presented by R. RAVI TEJA 09271A0242

CONTENTS INTRODUCTION CONCEPTS OF REGULATION AND DEREGULATION WHY WAS ELECTRIC UTILITY INDUSTRY REGULATED? STRUCTURE OF REGULATED INDUSTRY CONDITIONS THAT LED TO DEREGULATION STRUCTURE OF DEREGULATED INDUSTRY THE WHOLESALE POWER MARKET MARKET MODELS ISSUES INVOLVED IN DEREGULATION OF POWER INDUSTRY CONCLUSION

BASIC CONCEPTS OF Regulation AND Deregulation

Regulation:Regulation means that the govt. has set down

laws and rules that put limits on and describe how a particular industry or company can operate.

Deregulation: Deregulation in power industry is a

restructuring of the rules and economic incentives that government set up to control and drive the electric power industry.

30,500 MW

16,00042,420 MW

39,175 MW

37,486 MW

19,416 MW

2,06 MW

PRESENT SCENARIO OF INDIAN ELECTRIC POWER INDUSTRY

WHY WAS ELECTRIC UTILITY INDUSTRY REGULATED???

Regulation offered a risk free way to finance the creation of electric industry.

Establishment of Electric industry require large capital for infrastructure building.

It was agreed that business man would risk their money not the government towards capital investment.

Government also assured businessmen the local monopoly and a stable market.

Characteristics of regulated electric industry:

Monopoly Franchise Obligation to serve Regulatory oversight Least cost operation Regulated rates Assumed rate of return

STRUCTURE OF A REGULATED INDUSTRY

CONDITIONS THAT LED TO DEREGULATION

There are many reasons that led to deregulation of power industry. One force that led to deregulation of electric power was the change in Generation economies of scale that occurred throughout the 1980’s. Following are the main reasons:

The need for regulation changed Privatization Cost is expected to drop Customer focus will improve Encourages innovations

STRUCTURE OF DEREGULATED INDUSTRY

DIFFERENT ENTITIES IN DEREGULATED ENVIRONMENT

The introduction of deregulation has brought several entities in the electricity market place, while on the other hand redefining the scope of activities of many of the existing players. Variations exist across market structures over how each entity is particularly define and over what role it plays in the system.

Different entities: Genco Transco Disco Resco Independent system operator(Iso) coustomers

THE COMPETITIONA restructured, completely competitive

electric industry is a sandwich of competition. This structure can be conveniently divided into whole sale and retail levels.

The important thing to note is that the power delivery transmission and distribution remains the monopoly franchise.

THE WHOLESALE POWER MARKET

In order for a deregulated industry to work well, two additional entities or functions must be created:

Power market System operationBoth the functions must be accomplished

in one form or another in every deregulated electric power industry.

MARKETPLACE MECHANISMUnder deregulation, some system must be put in place where

competitive sellers of electricity can offer their product and transact sales. This can be done in three ways:

Poolco:There is only one buyer. It is a combined-buyer system operator.

Bilateral exchange:In this individual buyers and sellers make a deal to exchange a power

at prices and under the conditions they agree to, privately.

Power Exchange(PX):The buyer and sellers enter their needs into power exchange,

which operates much like a stock.

ENERGY AUCTION AND COMPETITIVE BIDDING..

The bids are generally in the form price and quantity quotations and specify how much the seller or buyer is willing to buy or sell and at what price.

Non-discriminated or Second price auction Discriminated or first price auction

MARKET MODELThere are mainly two models of dereguulation presently preferred

in the various countries all over the world.

Pool model:There is only single buyer for all the energy generated by gencos.

The buyers here is poolco, which also operate the system. Auction is single sided auction.

Open access model:The energy auctions and future markets are conducted by an

independent entity called power exchange(PX) and the system is operated by independent body called ISO, who assure equal opportunity for sellers and buyers through open access to grid.

ISSUES INVOLVED IN DEREGULATION OF POWER INDUSTRY

Network congestion Effects of network congestion

CONCLUSION

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