How green power trading can shape the future of the global energy transition

Written By :

Energy Markets Team


Published On :

22 April 2024


Published By :

ReNew

 

India has made significant strides in overcoming long-standing power shortages and establishing a sustainable electric supply in recent years. Looking forward to 2030, the nation aims to incorporate a substantial share of renewable energy into its energy mix, necessitating operational and market innovations. Short-term green energy markets are positioned as critical enablers in this transition, driven by imperatives such as enhancing market efficiency, developing renewable energy sources, ensuring energy security, improving grid operations, and sustainably meeting the growing electricity demand within the country.

 

While conventional power trading has been prevalent in India for more than two decades, it is only in the last three years that green power trading has witnessed substantial advancements. The complexity of renewable energy power trading, compounded by the intermittent nature of green electricity from sources like solar, wind, and hydro, has posed challenges thus far. Let us take a look at what green energy markets entail:

 

How is Green energy trading different from conventional power trading?

Green energy trading involves exchanging electricity with minimal greenhouse gas emissions, aligning with larger national as well as global efforts to mitigate climate change. Green power trading customers, including businesses, utilities, government institutions, data centers, and investors, play a pivotal role in driving demand for renewable energy, influencing market dynamics, and fostering the growth of a sustainable energy sector.

 

India's diverse energy mix, with a significant portion derived from clean sources like solar and wind energy, benefits from power trading by integrating these green sources into the grid. Power markets help balance supply and demand across regions, maximizing the utilization of existing infrastructure and improving overall grid stability. Market competitiveness, driven by power trading, contributes to effective price discovery, encourages investment in infrastructure, and promotes competitive rates for consumers.

 

However, India's green power trading sector faces significant challenges attributed to various factors:

  • The structure of power markets and the regulatory environment: An inconsistent policy framework, with frequent changes in laws, prices, and incentives disrupt market stability, hindering the trade of renewable energy.
  • Power infrastructure: The power system infrastructure is not fully equipped to handle large-scale integration of renewable sources, leading to grid congestion and curtailment issues.
  • Challenges with market mechanisms: Current market mechanisms, such as Renewable Energy Certificates (RECs) and Power Purchase Agreements (PPAs), have shortcomings, including low liquidity and difficulties with price discovery, payment delays, and contract enforcement issues.
  • Few players: The concentration of power trading and distribution among a few major players could hamper competitiveness and efficiency, limiting consumer choices and market expansion.
  • Concerns about uniform market clearing price: There are concerns over the uniform market clearing price (UMCP) mechanism in power exchanges, potentially allowing certain sellers to generate substantial gains. Regulators are exploring alternative pricing mechanisms to address these issues.
  • Awareness: Lack of understanding among stakeholders about the benefits and prospects of green power trading is a barrier, emphasizing the need for technical and institutional competence.
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    ReNew Energy Markets Pvt Ltd (REMPL) has emerged as a notable player, demonstrating the effective trading of intermittent renewable power in the market. REMPL has established a dedicated 500 MW merchant asset for green power trading, utilizing state-of-the-art technology and automated bidding processes. REMPL’s comprehensive power market solutions include coordinating with power suppliers, managing bid generation, and optimizing market strategy. With a team of power sector experts and successful engagement with over 30 counterparties, REMPL contributes to the evolution of green power trading in India, showcasing the potential for efficient and transparent operations in the renewable energy sector.

     

    Organisations stand to benefit immensely from leveraging RE power trading services. Here are some of them:

    1. It can help you lower your energy costs as RE costs are falling
    2. Help you hedge against the volatility of global costs of traditional energy sources
    3. Build an image of a sustainable brand in for your customers and other stakeholders by reducing your carbon emissions
    4. Be a part of the global energy transition and play your part in helping the environment

 

The multifaceted benefits offered by green energy trading combined with the urgency of transitioning to cleaner sources of energy to limit global warming, make a pressing case for renewable energy power trading to get a boost. And governments and the private sector stands to play an equally critical role in this endeavour.

 

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