When they transact with the power exchange buyers and sellers are really

When they transact with the power exchange buyers and

This preview shows page 42 - 44 out of 166 pages.

When they transact with the power exchange, buyers and sellers are really talking to the marketplace and not the individual buyers and sellers. As in a stock exchange, the power exchange constantly updates and posts a market clearing price (MCP), which is the current price at which the transactions are being done. Note that when buyers and sellers communicate with the power exchange, they don‘t know whom they are dealing with. The general step by step process of settling this market is as follows: 1.Generating companies submit bids to supply a certain amount of electrical energy at a certain price for the period under consideration. Usually, the period is an hour or half an hour. The bids are ranked in order of increasing price. From this, a curve that shows bid price as a function of bid quantity is built, which is commonly known as supply curve. Supply curve is a plot with price on y axis and quantity on x axis.
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2.Similarly, demand curve is established by asking consumers to submit offers specifying quantity and price and ranking these offers in decreasing order of price. If the load is willing to adjust its consumption with price, the load is said to have demand elasticity. If the load is firm, the demand curve will take the form of a vertical line with x axis intersection indicating total cumulative firm demand. 3.The intersection of supply and demand curves represents the market equilibrium. At this point, the supply matches the demand. This price is known as Market Clearing Price (MCP) or System Marginal Price (SMP). All the bids submitted at a price lower than or equal to the market clearing price are accepted and the generators are scheduled for that much amount of power for that particular time period under consideration. Similarly, all the offers submitted at a price greater than or equal to the market clearing price are accepted. 4.As for settlement, the generators are paid this MCP for every MWh they are scheduled for, while loads pay the MCP for every MWh they are cleared for. Illustrative Example for PX Clearing Suppose there is a central power exchange in which all players in the market send bids and offers. Table 3.2 shows the offers and bids supplied to the central power exchange for a particular hour of the next day, say 10:00 AM to 11:00 AM. Once the buyers and sellers provide offers and bids, the power exchange forms an aggregate supply curve and aggregate demand curve. The curves are plotted on the coordinates of supply (and demand) and price as shown in the Figure 3.11. The point of intersection of the two curves determines the market-clearing price (MCP). At this point, the supply satisfies the demand. From the intersection of supply and demand curves, the MCP would be set to 3200 INR/MWh and 450 MWh will be traded through the central power exchange. The MCP is the price of electric energy that is paid by consumers trading through the power exchange. The sellers are also paid at a price equal to the MCP. MCP is the highest sell bid or lowest buy bid accepted in the auction. The generator ‘S2' is
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