CERC green signal to HPX will stabilize ‘volatile’ energy market

Hindustan Power Exchange Limited (HPX), India’s new-age power exchange jointly promoted by PTC India Ltd, BSE and ICICI Bank, has been given the go-ahead by Central Electricity Regulatory Commission (CERC) for introducing high price contracts in three key markets-High Price Day Ahead Market (HP-DAM), High Price Term Ahead Market (HP-TAM), and High Price Contingency Contracts. At present India has three power exchanges, IEX, PXIL and HPX. In the present scenario, buyers and sellers at each exchange do trading of electricity and discover spot price separately at these exchanges. It is a place where participants can buy and sell energy through a double-sided closed auction process. State electricity boards, power-producing and power transmission companies, and power traders have a huge capital trade on IEX. CERC’s latest move comes as a part of its efforts to boost market dynamics, deepen the market and provide more opportunities for members to manage their risk while also optimising their energy portfolios. The High Price Contingency Contracts will provide the added stability to the energy market during periods of volatility.

Significantly, India's power demand has risen to 1905. Industrial sector has a share of more than 40 per cent in the total electricity consumption in India. Future investment will benefit from strong demand fundamentals, policy support and increasing government focus on infrastructure.

The power ministry had earlier sought CERC to initiate the process of coupling multiple power exchanges, a mechanism which seeks to ensure uniformity in price discovery of energy at trading platforms. From the HPX’ perspective, the CERC nod has ensured successful delivery of two new products for the power market within a short span of one year after having started its business operations last July. Till date these high-price generators had just one option to sell power-participation in the HP-DAM segment. With these new segments the generators can plan their power sale to interested buyers for up to 90 days, giving HP-generators sufficient clarity to work out their fuel procurement and logistics. This will ensure a level playing field across market segments and gives more choice to the consumers and promotes competition.

It is important to note that power trading is in a transition phase in India and the energy mix is changing in a big way. Transmission infrastructure has improved a lot in the last 3-4 years. There are also challenges attached to the power sector like inefficiencies in the distribution value chain with accumulation of large dues from discoms. Sector analysts opine that more renewable energy (RE) integration will the pave the way for a robust RE market availability implying better integration and fuelling RE power into the grid. The need of the hour is to introduce new initiatives like market-based ancillary services besides working towards having bilateral contracts in power exchanges and initiatives for renewable power to be traded through an efficient market.