India’s proposed Market-Based Economic Dispatch Mechanism Aims to Optimize Power Sector Resources
RMI analysis reveals potential daily savings of INR 1.5–4 crores per day across peak and off-peak seasons in Maharashtra and Tamil Nadu using the MBED mechanism.
RMI’s new report, Transforming India’s Electricity Markets: The Promises of Market-Based Economic Dispatch and the Path Forward, highlights key leverage points for successful implementation of wholesale market reforms that ensures long-term sustainable growth of the power sector in India.
The Indian power sector has evolved rapidly over the past decades, driving economic growth. Now, India has an opportunity to ensure electricity is procured reliably and efficiently, while paving the way for deployment of innovative and flexible power generation technologies. RMI emphasizes that India will need to reform existing wholesale markets to leapfrog toward increasing shares of renewable energy. This warrants a national impetus on resolving financial challenges in the distribution sector, including optimizing power sector resources to strengthen the country’s energy security.
The report outlines the Market-Based Economic Dispatch (MBED) mechanism, creating a shared understanding among stakeholders of the status and impact of proposed changes to India’s wholesale power market. The report provides a summary of the current market design in India, identifies the anticipated benefits of the MBED mechanism, and looks at key barriers toward implementation. It also shares lessons learned from international electricity markets and provides recommendations to successfully transition to the MBED mechanism in India’s power sector.
RMI’s analysis across two states demonstrates cost savings through the efficient dispatch of a pooled generator portfolio and finds potential system cost savings of INR 1.5–4 crore (US$184,000–US$491,000) per day over business-as-usual scenario.
MBED is a step toward creating a system that operates efficiently with an integrated pan-India approach for generators. The report demonstrates how India can ensure that the right electricity market operational structure is in place to develop a reliable, flexible, and cost-effective power sector. RMI Managing Director Clay Stranger said, “The MBED proposal is a key mechanism to optimize India’s power resources and it represents the next major opportunity to further India’s global leadership in advancing the innovative renewable energy sector.”
The full report can be accessed here: https://rmi.org/insight/transforming-indias-electricity-markets/
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