Study of electricity markets in different countries and lessons for India

Abstract

The Indian Power sector is evolving over towards a competitive market for electricity. This evolution is driven by four Acts: The Indian Electricity Act of 1910, The Electricity (Supply) Act of 1948, The Electricity regulatory Commissions Act of 1998 and The Electricity Act of 2003. However, but a suitable market sure they are effectively implemented and help in reaching the target of free electricity markets in India, an appropriate market model is needed. The Electricity Act-2003 has salient points like : Relicensing of Generation, easing of Captive Norms, introduction of Open Access, Stringent Anti- theft provisions , Speeding up of Rural Electrification and provisioning of Independent Regulators at the Central and State level . Through all these aim to create a vibrant power sector to facilitate India`s accelerated economic growth there are problems when it comes to competition in retail market allowed by Electricity Act-2003. These problems arise because of the demand inelastic nature of the electricity, accounting problems in allocation of technical losses because of the introduction of Open access and the role of SEBs in the long run. Moreover the regional variations and lack of clarity as far as a universal market model is concerned have added to implementation issues. This paper presents a study of the successful and unsuccessful processes of electricity market creation in various parts of the world viz. California, England and Wales , the Nordic Pool and New Zealand . The paper presents the market structure of each of the four international power markets identified. It analyses the pricing policies and the regulatory environment in the markets. The history development is briefly mentioned wherever necessary. The critical factors that lead to the success or failure of particular attempt are identified and key lessons for any new attempts (Particularly in Indian context) have been mentioned.