Market-Based Economic Dispatch (MBED) Mechanism

Why in the News?

Recently, the Ministry of Power proposed the Market-Based Economic Dispatch (MBED) mechanism to centralise scheduling for dispatching the entire annual electricity consumption.

About the Centralised Model of MBED:

• It is a proposed mechanism for centralised scheduling of power dispatches, both inter-state and intra-state.
• This will mark a clear shift from a decentralised model followed now.
• The implementation of the first phase of MBED was earlier planned to start from April 1, 2022 but it was put off for later in 2022.

Advantages: 

• It would deepen the power markets in line with the Centre’s ‘One Nation, One Grid, One Frequency, One Price’ formula.
• It will ensure the cheapest electricity generating resources across the country by prioritizing the least-cost and most efficient generators and removing more expensive ones.

Disadvantages: 

• It is seen as impinging on the relative autonomy of states in managing their electricity sector.
• This could take away the states of their freedom to decide their own electricity requirement while managing seasonal and local demand trends.
• It can create constitutional problems because power lies in the concurrent list.
• It could potentially clash with emerging market trends. 

• • Increase in renewable energy in the overall generation mix and the increasing numbers of electric vehicles actually necessitate greater decentralisation of markets.