The blog has reference to the recent cap introduced by the Indian regulator for day ahead electricity trading.
One of the stakeholders i.e. trader in the electricity trading value chain was already under lot of pressure due to a 5 paise (5 percent of a rupee) trading margin cap. This new cap on trading price might be a more severe blow to the emerging trading market in
Considering the price cap is very close to the cost of production plus a nominal rate of return for the gas based generators, it might act to their disadvantage to play in the short term trading market as compared to the coal or similar low cost generators.
This might also affect the upcoming projects, especially merchant power plants or group captives. Since these small power plants add significantly to the short term trading market, putting a cap on their sale price might not make things very lucrative for them.
The justification of burdening the end consumer due to price spike might not be true since the traded volume currently in day ahead market is insignificant to the overall volume of electricity being supplied.
Not sure whether such price caps have been applied elsewhere in emerging trading market. More important in a power deficit market where the cost of electricity once traded is bound to go up. I feel the price cap should be to stop a sudden abnormal spike and not create disincentives for certain type of generator.
