Power Exchanges in India

A power exchange is an electronic marketplace where electricity is bought and sold, much like a stock exchange for shares. Sellers (power plants, traders, discoms with extra power) put in offers, buyers (discoms, industries) put in bids, and the exchange finds a single price at which supply meets demand. Power bought on an exchange is delivered through the grid, usually for the next day or even within the same day.

Why do we need them?

Most electricity in India is sold through long-term contracts (power purchase agreements, or PPAs) that last 25 years or more. But demand changes every hour and every season. A discom may be short of power on a hot evening and have too much on a cool night. A power exchange lets it buy or sell the gap quickly and at a transparent price. It is like a sabzi mandi for electricity: everyone can see the price, and anyone with extra stock can sell it.

Where did they come from?

Section 66 of the Electricity Act, 2003 asked regulators to develop a power market. The CERC allowed power exchanges in 2007, and two exchanges began trading in 2008:

• Indian Energy Exchange (IEX): the largest, with most of the volume.
• Power Exchange India Ltd (PXIL).
• A third exchange, Hindustan Power Exchange (HPX), started later.

The exchanges are regulated by the CERC under the Power Market Regulations, 2021, which replaced the 2010 regulations.

How does trading work? The main market segments

• Day-Ahead Market (DAM): The main segment since 2008. Buyers and sellers bid today for power to be delivered tomorrow, in 15-minute blocks. One price is found for each block through a closed auction.
• Real-Time Market (RTM): Started on 1 June 2020. It runs 48 half-hourly auctions a day, with delivery about an hour later. It helps discoms fix last-minute gaps.
• Term-Ahead Market (TAM): For contracts from a few days up to longer periods ahead.
• Green Day-Ahead Market (GDAM): Launched in October 2021 only for renewable power. There is also a Green Term-Ahead Market (GTAM).
• High-Price Day-Ahead Market (HP-DAM): Started in 2023 for costly sources, such as imported gas or imported coal plants, whose cost is above the normal price cap.

Price caps

To protect buyers from very high prices during shortages, the CERC can cap bids. From April 2023, the ceiling was set at ₹10 per unit (kWh) for DAM, RTM, GDAM and term-ahead contracts, and ₹20 per unit for HP-DAM.

How big is the exchange market?

In 2024-25, all short-term electricity trade (including deviation settlement) was about 238 billion units, roughly 13% of India's total generation. Power exchanges handled about 144 billion units, or about 60% of this short-term trade. So exchanges still carry well under a tenth of all electricity, but they set a key price signal for the whole sector.

Market coupling

Today each exchange finds its own price. Market coupling means collecting bids from all exchanges and matching them centrally to find one uniform price for the whole country. In 2025, the CERC ordered a phased rollout, starting with the Day-Ahead Market, with the market coupling role rotating among the exchanges and Grid Controller of India (Grid-India) as backup and auditor. The move has faced legal challenges, and its full rollout is still being worked out.

Commonly confused concepts

• Power exchange vs power trader: A power exchange is a platform where many buyers and sellers meet and a common price is found. A power trader (like PTC India or NTPC Vidyut Vyapar Nigam) is a licensed company that buys power from one party and sells it to another through bilateral deals.
• Power exchange vs PPA: A PPA is a long-term, fixed contract between a generator and a discom. An exchange handles short-term trade.
• DAM vs RTM: DAM is for tomorrow's power; RTM is for power needed within the next hour or so.
• Power exchange (electricity) vs commodity exchange (MCX): MCX trades financial contracts on commodities; power exchanges deal in actual electricity delivered through the grid.

Issues, criticism and the way forward

• Price spikes: During heatwaves or fuel shortages, exchange prices can hit the cap, making power costly for discoms. Price caps protect buyers but may discourage costly generators from offering power.
• Market concentration: One exchange handles most of the volume. Supporters of market coupling say a single price and better grid use will improve efficiency; critics worry it may reduce competition and innovation among exchanges.
• Shallow market: Because most power is locked in long-term PPAs, only a small share is traded. Experts suggest deeper markets, more renewable and storage participation, and financial products such as electricity futures.

Concepts to Know

• Unit (kWh): One kilowatt-hour, the amount of electricity a 1,000-watt appliance uses in one hour. Your electricity bill counts these units.
• Billion units (BU): One billion kWh, used to measure electricity at the national level.
• Market clearing price: The single price at which the total quantity buyers want equals the total quantity sellers offer in an auction.
• Power purchase agreement (PPA): A long-term contract in which a discom agrees to buy power from a generator at a fixed price or formula.
• Peak demand: The highest amount of electricity needed at any one moment, usually on hot evenings.