What is Market-Based Economic Dispatch? How can the system change the Indian power sector?

The union Ministry of power is currently planning for a market-based economic dispatch mechanism. The scheme proposes a centralized scheduling of power dispatches, both interstate and intrastate.

Market-Based Economic Dispatch:

• Under this mechanism, the cheapest power from across the country will be dispatched to meet the systemwide demand.
• This is in line with the ‘one nation, one great, one frequency, one price’ formula.
• It creates a win-win situation for both the Discoms and consumers, by ensuring that the cheapest electricity generating resources across the country are supplied to meet the overall system demand.
• It is the radical shift from the current decentralized electricity market to a centralized framework.
• This process is expected to generate significant savings for consumers.

Challenges:

• It will interfere with the autonomy of states in managing their electricity sector.
• The mechanism will remove the state’s freedom to decide their own electricity requirements.
• It will increase the complexity in managing the overall grid.
• It can potentially clash with emerging market trends such as increase in renewable energy.

Way forward:

Being a subject of concurrent list, the states should be consulted for effective implementation of this mechanism.

Topics: GS-III: Infrastructure Energy Sector