Indian Energy Exchange: Revolution In Electricity Trading Segment

The changes in electrical reforms in the last few years have revolutionized the power markets around the world as well as in India. In a move to provide a level playing field for all participants.

The central electricity regulatory commission issued guidelines for the grant of permission for setting up and operation of power exchange and with in the overall regulatory framework, This has enable the transmission o f electricity through private of public monopoly market structure to one of competitive wholesale and retail mechanism with marketplaces like power exchanges.

The reforms objective is to increase the competition among the market players and make electricity more efficient, liquid & complete. The reforms have aimed at achieving certain objectives such as increase private participation, increase competition in the electricity market and providing cheaper electricity through efficient Operations.

The reforms will create the mobility in electricity market, very dynamic market places, increased the number of private players and change the price pattern of power. The Indian Energy Exchange (IEX), the country’s first power exchange launched at Multi Commodity Exchange (MCX) after receiving the approval from the CERC. The move has been taken to make the electricity trading transparent and neutral market through a technology-enabled national-level trading platform.

The electricity trading under the CERC will bring rationality in prices on IEX.IEX will provide the electricity trading in a Transparent manner and neutral market through a robust, scalable and customizable electronic trading platform. CERC on 9th June 2008 provides approval to Indian Energy Exchange (IEX) to commence its operations. IEX has been promoted by Financial Technologies India Ltd. And PTC India Ltd., and its key stake holders include Tata Power Company, Reliance Energy, Lanco Infratech, Adani Enterprises, Infrastructure Development Finance Company (IDFC), Rural Electrification Corporation (REC).

In power deficit country like India, the industrial units and business owners face shortages of power in their operations which results into a costly affair for them. There are areas where there is surplus power. The areas with surplus power can sell to areas where there are shortages of power. Thus IEX will bring about certain benefits to the electricity market, such as:-

• The exchange operations will be supervised under the CERC

• All payments to be guaranteed by the Exchange mechanism.

• No extra overheads and lower cost of transaction.

• Price and quantity traded will be displayed on IEX trading terminals.

• Flexibility in trading in desired quantity, price & Time.

• No need to search the buyers & sellers for buying & selling electricity.

• Improves the market environment to encourage investment in new generation capacity and help making India a power – surplus country.

Thus, IEX provides a platform for the buyer & sellers to purchase the electricity on actual demand and supply of energy. The participants can bid for buy and sell electricity for 24 hour during the trading hours .i.e. 10.00 am-12.00 pm. The buyers & sellers can be any individual but has to trade through the member. The member of IEX can be Generators, Distribution Licensees, Independent Power Producer (IPPs), Captive Power Producers (CPPs), Merchant Power Plants (MPPs), traders and others eligible to be a member. The minimum net worth for the purpose of membership eligibility is Rs. 150 lakhs.

Conclusion

As the electricity cannot be stored and the surplus gets waste because of its perishable nature. Thus to make an effort to use this surplus power and to reduce the demand – supply gap, it calls for a marketplace where surpluses can be disposed off efficient platform. To make this possible, the Indian Energy Exchange (IEX), provides an organized marketplace where the buyers and sellers can trade on the exchange. The exchange will bring the various players connected through a grid covering a large geographical area into a common market place and reduces the demand-supply gap. The exchange will also provide liquidity, efficiency and complete market place to the players of buying and selling electricity.