1 SmartGrid Initiatives and Power Market in India V. S. K. Murthy Balijepalli, Student Member, IEEE, S. A. Khaparde, Senior Member, IEEE, R. P. Gupta, Member, IEEE, and Yemula Pradeep, Student Member, IEEE, Abstract—SmartGrids were introduced to make the grid oper- ation smarter and intelligent. SmartGrid operations, upon appro- priate deployment can open up new avenues and opportunities with significant financial implications. SmartGrids can continue towards enhancement of power market. The current status of the power market as well as initiations of SmartGrids in India are studied to scrutinize the potential power market enhancement with the advent of SmartGrids. This paper presents various SmartGrid initiatives and implications in the context of power market evolution in India. I. I NTRODUCTION T HE Indian power sector is expanding at a fast pace. India has a power sector characterized by deficient generation and high distribution losses. The first power exchange of India was introduced in June 2008. SmartGrid activity has been re- ported in some distribution pockets mostly by private players. Many utilities in power sector have now SmartGrid activity with high priority in their research and development agenda. The market functions which are likely to get affected due to SmartGrids are discussed. The priority of these functions de- pends on several factors such as policies, regulation, efficiency of the markets, costs and benefits associated with the functions, and service providers and traders etc. Though there are many barriers for these new developments, the Government of India has some policies to support SmartGrids in the distribution sector. Some of the key issues emerging for implementation of SmartGrid include secure communication, standard protocols, data management and an efficient architecture which can facilitate data exchange. These issues are discussed in the Indian context. SmartGrids can bring in new market products also. Smart- Grids can convert data into useful information and have the capability to take local decisions in distributed manner, and can also offer self healing. These features can be used for market enhancement as decision support. There is growing demand for “quality power” in power market. SmartGrids can offer effective solution to this demand. Some details on these aspects are covered. Finally, a comprehensive road map on the role of SmartGrids for enhancement of power market in India is reported. The organization of the paper is as follows: In section II, an overview of Indian power market and its current operation structure is covered. Recently released market products are V. S. K. Murthy Balijepalli and Yemula Pradeep are research scholars with the Department of Electrical Engineering, Indian Institute of Technology Bombay, India, 400076. e-mail: vsk@ee.iitb.ac.in;ypradeep@ee.iitb.ac.in S. A. Khaparde is a professor with the Department of Electrical En- gineering, Indian Institute of Technology Bombay, India, 400076. e-mail: sak@ee.iitb.ac.in. R. P. Gupta is with the Crompton Greaves private limited, India, 400076. e-mail: Ramprakash.Gupta@cgl.co.in. detailed. Section III talks about the SmartGrid vision and various initiatives in India. Section V points towards some of the required focus areas and needs for an efficient power market with the advent of SmartGrids in India. Section VI concludes the paper. II. OVERVIEW OF I NDIAN POWER MARKET In India, electricity reforms started with the re-evaluation of Electricity Supply Act, 1948 and the Indian Electric- ity Act, 1910 which led to the Electricity Act, 2003. The Electricity Act, 2003 has been brought about to facilitate private sector participation and to help cash strapped state electricity boards to meet electricity demand. The Electricity Act, 2003 envisages competition in electricity market, pro- tection of consumers interests and provision of power for all. The act recommends the provision for national electric- ity policy, rural electrification, open access in transmission, phased open access in distribution, mandatory state electricity regulatory commissions (SERCs), license free generation and distribution, power trading, mandatory metering, and stringent penalties for theft of electricity. One more welcome step that the Indian electricity market has taken is the implementation of availability based tariff (ABT) which brought about the effective day-ahead scheduling and frequency sensitive charges for the deviation from the schedule for efficient real-time balancing and grid discipline. The fixed and variable costs of electricity production are treated separately in the ABT. Fixed cost, known as capacity charge, is associated with plant availability and its capacity to deliver MWs on day-to-day basis. Generating plant is paid the capacity charge according to its average availability over a year. Variable charge, known as energycharge, is the charge associated with the variable cost of energy production and the total amount paid to the generators is based on their scheduled energy production rather than actual production. The third component of ABT is called unscheduled interchange (UI) which is the payment for deviation from the schedule, and the rate is decided according to the system frequency. Beneficia- ries are paid for the underdrawal or charged for the overdrawal according to the system frequency. Thus the UI mechanism acts as a balancing market in which real-time price of the electricity is determined by the system frequency. To promote power trading in a free power market, central electricity regulatory commission (CERC) approved the setting up of Indian energy exchange (IEX) which is the first power exchange in India, in June 2008. IEX has been modeled based on the experience of one of the most successful international power exchanges, Nordpool. At present, two power exchanges are operating in India, namely, IEX and Power Exchange 978-1-4244-6551-4/10/$26.00 ©2010 IEEE