Chairman of the Central Electricity Authority (CEA) Ghanshyam Prasad described the electricity derivatives market as a long-awaited reform that will provide a longer time horizon for price predictability.He explained that derivatives, along with futures, will serve as an additional tool for power generators to manage the sale and purchase of electricity, particularly for any unsold capacity.While Power Purchase Agreements (PPAs) will continue to play a key role, Prasad said that buyers will need time to gain confidence and explore new opportunities.
He said that all discoms are already mandated to tie up resource adequacy and maintain it on a yearly basis. Hedging in the derivatives market, followed by price mark-ups, will indicate likely power prices over a longer horizon — unlike earlier, when the day-ahead and term-ahead markets offered visibility of only a single day in advance.On July 23, the Central Electricity Regulatory Commission (CERC) approved the implementation of Market Coupling with the Day Ahead Market (DAM) under the Power Market Regulations, 2021.The first phase of DAM coupling is scheduled for January 2026.Under this framework:
Power exchanges will act as Market Coupling Operators (MCOs) on a round-robin basis.
Grid India will serve as the fourth MCO for backup and audit purposes.
Real-Time Market (RTM) Coupling will be considered later, once experience is gained from DAM coupling.
RTM-SCED Coupling will require further regulatory and operational study.
Term-Ahead Market (TAM) Coupling will be tested through a new shadow pilot.
The policy directed CERC staff to begin stakeholder consultations for DAM coupling and propose regulatory amendments. It also asked Grid India to develop software for TAM coupling and run a three-month shadow pilot (including contingency contracts).After this exercise, Grid India will submit a feedback report. All power exchanges have been instructed to share the necessary data with Grid India and CERC staff to support implementation.
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