# Lecture 32: Spot Trading of Electricity in India (Part – II)

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### Lecture 32: Spot Trading of Electricity in India (Part – II)

Welcome to the next session on Commodity Derivatives and Risk Management and in the last session we were discussing different aspects of electricity trading and we discussed that predominantly a major part of the electricity which is produced by a generation company is delivered to a group of companies as part of long term power purchase agreement Any seasonal variation in the production is also made through the short term bilateral contract that is a company and the generation company enter into bilateral contract Any excess electricity which is produced by the by generation company or companies which require some for some specific reason if they need some excess electricity for a sometime of the day or some time in a month, they come to the exchange platform and try to get a arrange a arrange electricity in this exchange platform And in the last class we also discussed how this exchange platform solicits bid volume, bid quantity, bid quantity, bid price, sells quantity and sells price for every 15 minutes block for a given day and accordingly the price matching is done to arrived at a equilibrium price which is known as market clearing price and equilibrium volume which is known as a market clearing volume MCP and MCV respectively And just to take you through I will just show you the power point sorry the excel file which I was discussing You remember that this company or a different buyers and sellers give different bid and bid volume bid price, sell volume, sell price that is buy volume, buy price and sell volume, sell price and the exchange tries to find out the equilibrium price and we discussed also how interpolation method can be found out to arrive the equilibrium price here and we discussed that the equilibrium price is the price at which a price where maximum volume can be cleared for that particular day that particular time of the time slot So we also discussed if you recall we also discussed with this particular, so you this is the demand curve, this is the supply curve, this is the price, this is the quantity and you had we were supposed to find out the interpolation between these four points to find out the coordinates of this intersection point So let me repeat we were using the X, Y coordinates for these 4 points to find out the X, Y value for this intersection point and let us say this for the previous example, the intersection point is at 3.20 prices per kilowatt hour and the market clearing volume is 3600 units Now so any buyer who has quoted a price greater than 3.20 he will be allowed to sell allowed to buy electricity and a seller which has who has quoted any price less than 3.20 will be allowed to sell the electricity through the exchange platform Of course actual delivery will happen to the grid, the seller will be releasing connecting its whatever generation it is doing to the grid and the buyers will also start their