Market-Based Economic Dispatch (MBED) mechanism

September 19, 2022

The Union Ministry of Power is currently calling for the Market-Based Economic Dispatch (MBED) mechanism – a radical shift from the current decentralized, voluntary pool-based electricity market.

What is the MBED mechanism?

The MBED mechanism envisages a centralized scheduling for dispatching the entire yearly consumption of electricity of around 1,400 billion units.
It proposes a centralized scheduling of power dispatches both at the inter-state and intra-state levels.
This will interfere in the autonomy of states in managing their electricity sector, including their own generating stations.
It will make distribution companies, mainly owned by the state governments, completely dependent on the centralized mechanism.
This mechanism will remove the states’ freedom to decide their own electricity requirements and prevent them from effectively managing seasonal and local demand trends.
The Central Government is advocating for the new model to deepen power market in line with the ‘One Nation, One Grid, One Frequency, One Price’ formula and to minimise the cost of generating electricity across India.
According to experts, the new mechanism goes against the Indian Constitutional provisions, the current legal framework and market structure.
It will also create complications in the overall grid management.
Power currently belongs to the Concurrent List of the Indian Constitution, with the electricity grid divided into state-wise autonomous control areas managed by the State Load Dispatch Centres (SLDCs), which comes under the supervision of the Regional Load Dispatch Centres (RLDCs) and the National Load Dispatch Centre (NLDC).
Each control area is in charge of balancing the demands with generation resources in real time.
The MBED seeks to change this by replacing it with a central market operator to dispatch inter-state and intra-state generation plants.
It will minimise the options currently available under the voluntary market design, as it makes day-ahead contracts redundant.
The new model can clash with the emerging market trends as the rapid transition to EVs and renewable energy requires greater decentralization of markets and voluntary pools for the effective management of grid.