Generation sector is most amenable to competition provided it is unbundled from transmission and distribution of electricity. The intermingling of electrons in the grid from various sources; the non- storability of electrical energy; the need for prior transmission clearance before any electricity trade can be confirmed; limited number of suppliers; and inelastic nature of demand are well-known challenges in the way of setting up electricity markets. A mandatory power pool for supply side bidding ina deficit scenario can result in price shocks. Voluntary electricity market co-existing with long-term PPAs provides flexibility to the buyers to optimise their purchase basket without too much risk. A liquid short-term market helps the distribution utilities and consumers to balance their load-supply position in real time which is essential for grid security. Electricity markets can drive private investment even with low volumes, providing relief from power shortages.
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