Ministry requests for Uniform Electricity Prices across Exchanges

12 Jun 2023 CW Team

According to a letter from the ministry to the regulator, several stakeholders had approached them, leading to the decision to proceed with the market coupling process.

Market coupling involves accepting bids from all power exchanges, which are then consolidated by a market coupling operator to create a single combined solution.

India currently has three power exchanges: India Energy Exchange (IEX), Hindustan Power Exchange (HPX), and Power Exchange India (PXI). Among these, IEX dominates the trading volume with 99.9 per cent market share.

At present, the market share distribution does not significantly affect the impact of market coupling, as noted by an industry source and a government official.

However, market coupling could create an opportunity for other exchanges to gain market share in day-ahead and real-time trading.

Naveen Singh, head of business development at Hindustan Power Exchange, stated, "This move will enhance the service levels in the power market, ensure better transparency, and facilitate uniform price discovery across exchanges. It is also expected to significantly reduce power tariffs in the country."

Rohit Bajaj, head of business development, regulatory affairs & strategy at IEX, explained that India follows a voluntary market framework where all exchanges have equal opportunities.

Regarding market coupling, Bajaj added that it is typically used to connect markets operating in different geographic regions, which is not applicable in India's case. He mentioned that all regions in the country are already interconnected, resulting in one market and one price. The government has requested CERC to initiate the consultation and finalisation process for the market coupling construct, taking into consideration the objectives and requirements within the current market framework.

The Ministry of Power has made a request to the Central Electricity Regulatory Commission (CERC) to begin the market coupling process for multiple electricity exchanges, aiming to achieve uniform prices across these exchanges. According to a letter from the ministry to the regulator, several stakeholders had approached them, leading to the decision to proceed with the market coupling process. Market coupling involves accepting bids from all power exchanges, which are then consolidated by a market coupling operator to create a single combined solution. India currently has three power exchanges: India Energy Exchange (IEX), Hindustan Power Exchange (HPX), and Power Exchange India (PXI). Among these, IEX dominates the trading volume with 99.9 per cent market share. At present, the market share distribution does not significantly affect the impact of market coupling, as noted by an industry source and a government official. However, market coupling could create an opportunity for other exchanges to gain market share in day-ahead and real-time trading. Naveen Singh, head of business development at Hindustan Power Exchange, stated, This move will enhance the service levels in the power market, ensure better transparency, and facilitate uniform price discovery across exchanges. It is also expected to significantly reduce power tariffs in the country. Rohit Bajaj, head of business development, regulatory affairs & strategy at IEX, explained that India follows a voluntary market framework where all exchanges have equal opportunities. Regarding market coupling, Bajaj added that it is typically used to connect markets operating in different geographic regions, which is not applicable in India's case. He mentioned that all regions in the country are already interconnected, resulting in one market and one price. The government has requested CERC to initiate the consultation and finalisation process for the market coupling construct, taking into consideration the objectives and requirements within the current market framework.

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