The Market-Based Economic Dispatch (MBED) mechanism

What is MBED mechanism?

• The new model proposes a centralised scheduling of power dispatches, both inter-state and intra-state. 
• MBED model is seen as on the relative autonomy of states in managing their electricity sector, including their own generating stations, and make the discoms entirely dependent on the centralised mechanism which has been buttressed by the Electricity Act 2003 and follow-on reforms.
• There are concerns this could strip states of their freedom to decide their own electricity requirement while managing seasonal and local demand trends. 
• The Union power ministry said  MBED as a way forward to deepen power markets in line with the Centre’s ‘One Nation, One Grid, One Frequency, One Price’ formula. 
• The implementation of the first phase of MBED was earlier planned to start with effect from April 1, but was put off for later in 2022, with a date yet to be announced.

• The Centre’s argument is that the current model of states doing scheduling is suboptimal. As part of this, an algorithm developed by the NLDC called the Security Constrained Economic Dispatch (SCED) is being cited as a solution.
• SCED is aimed at assisting regulators in making informed calls on scheduling decisions on a nationwide basis. 

• Power is in the Concurrent List of the Constitution, with the electricity grid being divided into state-wise autonomous control areas managed by the State Load Dispatch Centres (SLDCs), which in turn are supervised by Regional Load Dispatch Centres (RLDCs) and the National Load Dispatch Centre (NLDC).
• As things stand, each control area is responsible in real time for balancing its demand with generation resources.
• The MBED model proposes to change this by putting in place a central market operator to dispatch the inter-state as well as intra-state generation plants. 
• Also, there is an inference that the new model will narrow the multiple options currently available under the voluntary market design; with day-ahead contracts turning redundant and, from a state’s perspective, the discoms and SLDC needing to buy or sell power in the real-time market, even if it is for the sake of maintaining demand-supply balance in their control areas.

Note:

• India has a diversified electricity market ranging from long-term power purchase agreements (PPAs), cross border PPAs, short and medium term bilaterals, day-ahead power exchange, and a real-time online market. 
• A major percentage of the installed power capacity –over 87 per cent – is tied up under long term PPAs of around 25 years. 
• The remaining 13 per cent is transacted in the power markets, with nearly half of this over the power exchanges and the remaining through short-term and medium-term bilateral deals.
• At present, each control area or state follows merit-order dispatch (cheapest power dispatched first) from the basket of intra-state and inter-state resources and buys or sells on the day-ahead power exchange. 
• The schedules under long-term PPAs can be revised, but not for the power traded at the day-ahead power exchange. 
• The un-tied generators in the private sector scout for buyers in the bilateral market as well as on the power exchanges on a voluntary basis currently.