Interview with Dr Rajib Kumar Mishra

“The opportunities are endless”

The power market design is witnessing a significant transition. The launch of electricity derivatives is on the horizon and initiatives are under way for virtual agreements and virtual power plants (VPPs). PTC India Limited aims to be a significant player in this emerging market. In a recent interview with Power Line, Dr Rajib Kumar Mishra, Chairman and Managing Director (addl. charge), PTC India, shared his views on the current state of the power sector, PTC’s key achievements as well as the outlook for power trading. Excerpts…

How do you assess the current state of the power sector?

India has achieved a major milestone with 395 GW of installed capacity, coupled with a robust transmission network of HVDC and 765 kV lines. Fundamen­ta­lly, the structural dynamics of the power sector are bullish for the long term. However, the current demand has gone up and peak demand has increased by 10 per cent to 199 GW in 2022. In the short run, power availability has been impacted due to fuel supply constraints, increa­se in economic activity after the lifting of Covid restrictions and the increase in power demand due to the early onset of summer. Weather forecasts predict normal and ahead-of-time monsoons. The availability of water for hydro generation and substantial wind generation will augment supply and br­ing down power prices by mid-May. Uti­liti­es/states in the coastal regions, which are dependent upon generation based on imported coal, may continue to be im­pa­c­ted till the situation normalises. Similar­ly, utilities/ states that are receiving supply from non-pithead generating plants will also continue to be impacted.

Additionally, the electricity market desi­gn is undergoing some fundamental ch­anges with the emergence of new seg­me­nts, new regulations and new design el­e­ments such as renewable energy, batteries, electric vehicles (EVs), green hy­dro­gen, general network access, ancilla­ries and financial derivatives.  So, the st­a­te of the power sector, from a long-term perspective, is one of optimism and gr­owth. It is my belief that all of the supply factors will get corrected in the next couple of months and we will see a normalised scenario soon.

What have been the key highlights for PTC India in the past one year or so?

We have traded record volumes of 87 billion units in the previous financial year (2021-22). We trade in over-the-counter (OTC) market and on the exchange platforms,  and in every segment. We have short-term, me­dium-term and long-term contracts and we participate in the real-time market as well. We also trade renewable energy ce­r­tificates (RECs) for our clients. We ha­ve added to our cross-border contracts. We have also taken great strides in our consulting/advisory business, adding marquee clients. We are currently promoting a third power exchange, for which significant work has been accomplished in the previous financial ye­ar, and we are aiming to launch it shor­t­ly. Addi­tionally, we have taken several initiatives towards preparing for the new design elements being introduced in the power market, especially derivatives- and technology-based solutions.

What has been the trend in short-term and long-term trading in PTC’s trading portfolio?

PTC has a well-articulated objective of maintaining an equal weighted (50:50) portfolio of medium-term and long-term contracts on the one hand and short-term contracts on the other. In fact, this bedrock of medium-term and long-term contracts lends stability and robustness to PTC’s business model. However, in the past two years of the Covid-19 pandemic, we observed that the extremely sh­ort end of the market, especially on the power exchanges, had become ex­­tremely active as customers availed of the ex­tre­m­ely low prices prevailing then. Today the prices on the power exchanges have sh­ot up temporarily and customers are opting to lock in longer-term contracts. At PTC, we trade in all tenors of contracts and are able to nimbly pivot whenever the market throws up opportunities. Ho­w­ever, our long-term objective of maintaining a balanced portfolio across all segments and all tenors remains intact.

What are PTC India’s future plans? What are its key focus areas going forward?

PTC is currently morphing itself from being predominantly an electricity trader to a total solutions provider in the electricity value chain, with an expanded definition to include battery energy storage systems and green hydrogen. We believe that trading as we know it will also undergo a change, with PTC assuming market risks and taking positions. Increasingly, we are focusing on offering solutions for renewable energy participants on both the supply side and the demand side. We are also focused on structuring solutions for virtual contracts and acting as VPPs. As and when electricity derivatives get la­un­ched, we expect to be a significant pla­yer in the market. While trading will remain a staple activity of the company, we want to scale our advisory/consulting business, including in the area of energy portfolio management, which would re­quire technology-intensive solutions. We are also focused on embedding ourselves in the developing value chain of battery energy storage systems and green hydrogen. Therefore, a significant focus of the company is on engaging in capability bu­il­ding exercises so that, as and when the­se opportunities come up, the organisation has the requisite competencies to capitalise on them.

What is your outlook on cross-border electricity trade in the South Asia region? How can it be improved?

We, at PTC­­­­ already act as a nodal agency for the Government of India for cross-border electricity trade. We currently tra­de actively with Bhutan, Bangladesh and Nepal and offer solutions through and access to the vast Indian electricity ma­rket to utilities in these countries. We be­lie­ve that the opportunities for trade with co­untries bordering India are immense. The traditional bottlenecks for trading ha­ve been the lack of strong transmissi­on links and lack of regulatory consiste­ncy across these independent nation states. There is absolutely no doubt that given the prevailing resource mix across these countries and their varied demand profiles, a single market, or at least one that operates like a power pool, can be of im­mense benefit to each and every one of them. This will improve efficient utilisation of existing assets, saving billions of dollars in expenditure that would otherwise be incurred to set up redundant ca­pa­city in each country. However, geo-political stability and stable policies with unconditional acceptance of this cooperation are necessary to promote such tra­des. Until then, the trades will be project specific or be marginal in nature.

What are the steps required to deepen the power trading market in the country?

Traders are market makers. They continually scan the environment and design bespoke solutions that optimise the demand-supply scenario for the stakeholders and also help correct market distortions. So, in essence, what the traders need is an enabling environment of consistent regulation across states so that solutions can be tailored to solve temporal and geographical mismatches. Anoth­er initiative that could deepen the market is to allow virtual power purchase agree­me­nts (PPAs), which would enable trade­rs to utilise their strengths as market ma­kers and offer customised solutions such as segregating power and green attributes. With the right enabling provisions, tra­d­ers and aggregators could even plants, leveraging technology and the ability to structure contracts with a portfolio of assets. And the biggest en­abler, of course, is the separation of carriage and content in distribution because that will result in huge opportunities for entities such as traders, aggregators and service provid­e­rs, who will compete on quality, reliability and costs.

What is your long-term outlook for the power sector and the role of power trading in it?

I am continually bullish about the In­dian power sector. I have been a power sector professional throughout my career and I have witnessed the evolution of this sector from vertically integrated, heavily regulated behemoths to the current version that incorporates a dynamic trading environment. The market design even now is in transition. Electricity is an essential commodity and yet, the per capita consumption of electricity in India lags behind some countries such as China and Brazil. With an economy that is poi­sed to grow in double digits in nominal terms, conservative elasticity numbers of power to GDP will still project a huge growth scenario. To this fundamental tail­wind, when you add the new design elements (in the works or otherwise) in the OTC markets as well as power exch­an­ges such as real-time markets, green day-ahead markets, green term-ahead ma­r­kets, ancillary services, general network access and refurbished REC regulations, the opportunities are endless. Our mission to achieve net carbon zero by 2070, the increasing adoption of EVs and battery energy storage systems or the policy on green hydrogen are also the tip of the proverbial iceberg of opportunity. With the launch of electricity derivatives on the horizon and initiatives for virtual agreements and VPPs also under way, the possibilities are immense. It is my fundamental belief that the entity best placed to contribute to this emerging design is a power trader/aggregator. Power traders are lean, flexible organisations with comprehensive market knowledge and the ability to respond proactively and reactively across these segments by offering cu­stomised solutions. As an illustration, you could look at PTC’s initiatives to op­erationalise stressed assets or its ability to straddle both the OTC market and the power exchanges by participating in ev­ery single market segment. The only real asset that we have is knowledge resources and a deep domain expertise of the sector from a perch that gives a view of generation, transmission, distribution, offtake, financing, cash flows, etc. There­fore, all the design changes that are currently ha­ppening and/or are expected to happen in the near future will all provide huge opportunities to power traders.

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