Moving to Real Time

RTM to bring in flexibility in electricity markets

The Indian power sector achieved a milestone on June 1, 2020, with the introduction of the real-time market (RTM) for electricity trading. The RTM platform provides buyers and sellers an organised platform for power trading just an hour before delivery, enabling discoms and industrial open access users to better manage their demand while allowing gencos to sell unexpected surplus power. Till now, electricity could be delivered through spot contracts on the same day, next day, or on a weekly basis. At the launch ceremony, R.K. Singh, the power minister, remarked that this development has placed the Indian electricity market amongst the league of the few electricity markets in the world that have a real-time market.

The RTM is expected to bring in the required flexibility to provide real-time balance while ensuring optimal utilisation of the available surplus capacity in the system. It will also help manage the varied demand pattern in the country in an organised manner at the national level. The National Load Despatch Centre (NLDC) is facilitating the automation required for the RTM in coordination with the two power exchanges, the Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL).

Trading mechanism

RTM transactions will take place every 30 minutes in a day based on the double-sided closed auction and at a uniform price. Buyers and sellers can place buy and sell bids for each 15-minute time block. There are 48 auction sessions during the day and the power is delivered within one hour of closure of the bid session. The first bid session starts at 2245 hours. The RTM is being implemented in line with the Central Electricity Regulatory Commission’s (CERC) framework issued in December 2019. The commission has stipulated the methodology for the allocation of the transmission corridor between the power exchanges. It provides the guidelines for the real-time scheduling of collective transactions at the power exchanges. Notably, the concept of gate closure has been introduced in the RTM to ensure firmness in schedules during market operation hours.


Discoms: Currently, discoms’ power procurement mix is dominated by long-term contracts, which account for 90 per cent of the total power procured while only 10 per cent power is procured through short-term transactions. However, long-term PPAs come with the burden of fixed charges, which need to be paid by discoms even if they do not wish to purchase power owing to lower demand. A 25-year long-term PPA might have been the right approach two decades ago to bring in investments and provide certainty to investors. Today, however, the discoms are certainly not in a position to enter into such long-term PPAs given the changing dynamics of the sector and the availability of more competitive alternatives. The RTM would enable discoms to optimise their power purchase portfolio and not tie up excess capacity. This will not only lead to an overall reduction in the power procurement cost but also help discoms deal with exigencies like a sudden hike in load without resorting to power cuts. This is especially beneficial since the revised version of the Tariff Policy is likely to include penalties for load shedding or unscheduled power cuts. So far, discoms have resorted to the deviation settlement mechanism (DSM) for meeting their real-time needs, resulting in significant penalties.

Rohit Bajaj, head, business development, and senior vice president, IEX, says, “The commencement of the RTM has provided an avenue to distribution companies to meet their power demand in the most efficient way. Being near to real time, the market aids the utilities in balancing their demand-supply and providing 24×7 power supply in a flexible and cost-competitive way. Until the commencement of the market, the financially stressed utilities had to opt for DSM for balancing real-time requirements, which resulted in huge financial penalties for them. The RTM, an endeavour by the CERC and the Ministry of Power, will greatly help the utilities to save on such penalties.” According to SabyasachiMajumdar, group head and senior vice president, corporate ratings, ICRA Limited, “Considering a 50 paise per unit saving under RTM trading against DSM and assuming a 50 per cent transition in procurement from DSM to RTM in the near to medium term, the annual savings for discoms and open access consumers are estimated at Rs 5.5 billion.”

C&I consumers: Besides discoms, the RTM provides an attractive option to commercial and industrial (C&I) consumers to meet their electricity demand at competitive rates. Already, a large number of open access consumers are procuring power through the exchanges in the day-ahead market (DAM) and term-ahead market (TAM) segments. As per ICRA, C&I consumers may increase their power procurement through open access using the RTM and DAM on power exchanges owing to attractive tariffs. However, this may negatively impact the revenues and profitability for discoms given that such consumer segments cross-subsidise other consumer category tariffs. Considering open access charges at the higher end of Rs 4 per unit and a spot power tariff of Rs 2.50 per unit, the procurement from open access is likely to be more economical for C&I consumers at the prevailing grid tariff rates. This in turn may also lead to an upward pressure on cross-subsidy surcharge and additional surcharge imposed by discoms so as to discourage open access.

Generators: The RTM offers a multitude of benefits to generators, which can sell excess generation on a round-the-clock basis, thereby enabling better capacity utilisation and improving commercial gains. It also provides alternative buyers to gencos in case discoms back down power. Likewise, gencos can procure power from the RTM in case of a forced outage and meet their contractual obligations to gencos and avoid DSM penalties.

Grid operators: The RTM is also likely to help the system operator (NLDC/POSOCO) improve grid management and safety, especially with increasing renewable energy penetration. It can aid in managing real-time imbalances in the system arising out of demand changes, renewable energy variability and supply-side constraints more efficiently than existing mechanisms such as DSM and ancillary services, thereby facilitating the large-scale integration of renewable energy.

Price and volume trends

The RTM experienced a good start, especially considering the industry’s apprehensions regarding low electricity demand owing to the impact of Covid-19. Nearly 370 MUs of electricity has been traded at the IEX platform during June 1-25, 2020. The sell bid volume (at 1,476.5 MU) has been thrice as much as the purchase bid volume (539.8 MUs), leading to softening of prices. The average market clearing price (MCP) during this period stood at Rs 2.15 per kWh. The maximum MCP discovered so far has been Rs 4.30 per unit while the minimum price has been Re 0.015 per unit. Bajaj remarks, “The experience so far has been phenomenally good. On the first day of the commencement itself we had 100 market participants trading in the market representing generation companies, distribution utilities as well as open access consumers.” A quick comparison with the DAM at the IEX shows that RTM prices are relatively lower. The average MCP at the DAM stood at Rs 2.28 per unit during June 1-25, 2020, which is 5.7 per cent higher than the RTM price (Rs 2.15 per kWh). The volumes at the DAM, however, were higher at over 3,350 MUs since it is an established market segment.

Going forward, the prices at the RTM are expected to remain soft in the near term owing to moderate growth in demand. GirishkumarKadam, sector head and vice president, corporate ratings, ICRA, says, “The prices on the power exchange market (both the RTM and DAM) are expected to remain subdued (less than Rs 3 per unit) in the near term, given the surplus capacity scenario and subdued demand growth expectations for the current year, with the adverse impact of the ongoing lockdown/restrictions imposed to control the Covid-19 pandemic. Subdued power tariffs on the power exchange thus remain positive for the discoms and open access consumers and, in turn, would also augment open access transactions. However, such spot tariffs remain unviable for thermal IPPs, which do not have long-term PPAs.”


The entire process since the time of gate closure – the announcement of available transfer capacity, bid matching, submission of electricity volume to the NLDC, and allocation of the available corridor margin between the exchanges – has to be completed within 15 minutes. This requires a robust communication network between the NLDC and the power exchanges to ensure the smooth operation of RTM sessions throughout the day.  Going forward, market volumes are likely to grow in the near future as greater renewable energy is added to the system and existing long-term PPAs of discoms expire. Net, net, the RTM has unlocked a new regime, which will be a win-win for all stakeholders.

Neha Bhatnagar


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