On 21 August 2020, the green term–ahead market (GTAM), a power trading platform, was launched to enable bulk electricity buyers (discoms; corporates with a contracted load of 1 MW or above) to procure renewable energy (RE) on a short-term basis from sellers (merchant RE projects or discoms having surplus RE beyond their renewable purchase obligations or RPOs).
Typically, discoms and open-access consumers procure electricity by signing long-term power purchase agreements (PPAs) for seven years or above. But, with GTAM’s launch, a new platform has emerged through from which these buyers can procure RE. In addition, it has also created opportunities for project developers to develop merchant RE capacity without getting tied down by long-term PPAs. In addition, the platform is expected to encourage RE-rich states to expand their renewable capacities beyond their RPO requirements and sell the surplus to RE-deficient states or corporate open-access consumers.
The GTAM enables transactions between buyers and sellers through bilateral trading. Four types of short-term contracts are covered under the GTAM as described below.
Figure 1: GTAM day–ahead contingency market volume and prices
Source: Indian Energy Exchange
A preference for day–ahead contingency contracts has been clearly observed among buyers due to greater flexibility of these contracts. Other contracts account for negligible volumes.
We can see from Figure 1 that the volumes traded on the GTAM are directly dependent on the solar–wind season. In other words, volumes remained tepid during the low solar–wind season from December 2020 to March 2021 and picked up significantly from April 2021 with the sun shining brightly. Our industry interactions also reveal that discoms having surplus RE beyond their RPOs are the majority sellers in the GTAM, including key states such as Andhra Pradesh, Gujarat, Karnataka, and Telangana. Vintage wind projects without PPAs, as well as renewable energy certificate (REC) projects, constitute the remaining sell-side volumes over the GTAM. Given the stay on REC trading since June 2020, REC projects have been utilising GTAM as an alternative platform to sell RE.
Corporates around the world as well as in India are increasingly facing pressure from investors to demonstrate their green credentials and are committing to RE consumption. GTAM is a lucrative option for corporates to procure RE on a flexible basis. Though it was launched with the twin objectives of encouraging RE-rich states to sell surplus RE and increase merchant RE capacity, the latter is yet to see traction with project financiers preferring the traditional PPA route. Increasing RE consumption on the part of open-access consumers and discoms thereby boosting liquidity in the GTAM is expected to augment merchant RE capacity additions in India.