Trading Update: Key trends and developments in the segment

The power trading segment has been playing a significant role in easing the purchase and sale of thermal and renewable energy. The trading market witnessed several key developments during the past year including the introduction of a new segment, the high-price day-ahead market (HP-DAM), to provide a new avenue to high-variable-cost generators; the Central Electricity Regulatory Commission’s (CERC) staff paper on market coupling, which analyses various aspects of market coup­ling and its im­pact on the three power exchanges; and the notification of the new carbon credit trading scheme, which aims to create a thriving domestic carbon market in India through the trading of carbon credit certificates on the power exchanges. Power Line presents a round-up of the key trends and developments in the pow­er trading market during the past year…

Short-term market trading

The share of short-term trading volumes in total generation (excluding generation from renewable energy and captive power plants) in 2022-23 was around 14 per cent, at around 194.34 BUs. The short-term market recorded a 4 per cent increase in volumes traded in 2022-23 compared to 2021-22.

During 2022-23, out of the total volume of short-term market transactions, trading through power exchanges in the day-ahead market (DAM) and real-time market (RTM) segments accounted for 41 per cent (79 BUs) of the total volumes. Other transactions that took place in the short-term market included bilateral transactions (88.7 BUs), which accounted for 45.63 per cent of the total short-term market. This included transactions thro­ugh traders and term-ahead contracts on power exchanges (57.38 BUs), and direct transactions between discoms (31.29 BUs). The remaining short-term trading volumes consisted of deviation settlement mechanism transactions, accounting for 13.52 per cent (26.29 BUs) of the total volume.

Power exchange segment

India has three power exchange platforms – Indian Energy Exchange (IEX), Power Exchange of India Ltd (PXIL) and Hindustan Power Exchange (HPX). The volume of transactions through the pow­er exchanges reached 102.95 BUs in 2022-23, in all market segments – DAM, green DAM (GDAM), RTM, term-ahead market (TAM) and green TAM (GTAM).

Player-wise, IEX traded over 90.65 BUs, or over 88 per cent, of the total power exchange volumes across all these segments. PXIL accounted for 9.52 BUs or 9.25 per cent of the total, whereas HPX accounted for 2.77 BUs or 2.7 per cent.


Electricity traded through traders was recorded at 33.8 BUs during 2022-23, accounting for 17.4 per cent of the total transaction volume in the short-term market. This marked a decline of 14.4 per cent from the 39.47 BUs recorded in the previous financial year. During 2022-23, the weighted average price of electricity transacted through traders ranged from Rs 4.70 per unit to Rs 7.47 per unit.

Trade in certificates

Renewable energy certificates: During 2022-23, 8.16 million renewable energy certificates (RECs) were traded across the three exchanges. The market volume of RECs traded at IEX accounted for 73 per cent of the total certificates traded, those at PXIL accounted for 26 per cent, and HPX had about a 1 per cent sha­re.

Energy-saving certificates: On Feb­r­uary 14, 2023, the trading of energy-saving certificates (ESCerts) under the Perform, Ac­hieve, Trade (PAT) mechanism Cy­cle II was resumed. As announced by the central government, the floor price for trade is set at 10 per cent of the cost of 1 Mtoe of energy consumed, or Rs 1,840. Overall, during 2022-23, IEX transacted a total of 176,479 ESCerts (equal to 176 MUs), while for PXIL, total traded volume was 109,572 ESCerts (109 MUs).

Key developments

Introduction of HP-DAM contracts: In February 2023, IEX received approval for introducing HP-DAM contracts for trading. Gas-based power plants using impo­r­ted regasified liquefied natural gas and naphtha, imported-coal-based power plants, and battery energy storage systems can qualify to be eligible sellers in this category. This was initiated for generation systems that are liable to cross Rs 12 per unit as their cost of generation. The CERC fixed a price ceiling of Rs 20 per unit of electricity for this new segment.

Staff paper on market coupling: In June 2023, the Ministry of Power (MoP) direc­ted the CERC to initiate the consultation process for market coupling and finalise the framework for its implementati­on. Market coupling involves the aggre­ga­tion of buy and sell bids from all po-wer exchange platforms of a country un­der a unified power trading system, whi­ch can facilitate the determination of a uniform market clearing price th­rou­ghout the country. In August 2023, the CERC issued a staff paper on market co­u­pling. The paper discusses the regulatory provisions for market coupling, international experiences, its objectives in India, the issues and challenges in im­plementing it, and other key points.

Carbon credits trading: The Govern­me­nt of India passed amendments to the Energy Conservation Act, (2022) in Dec­ember 2022. These amendments paved the way for the development of a Natio­nal carbon market in India. In July 2023, the MoP notified the Carbon Credits Ma­rkets Scheme, approving the formation of India’s first domestic, regulated carbon market. This has necessitated the formation of a National Steering Co­m­mittee to govern and oversee its functioning. According to the guidelines, the trading of carbon credits will begin shortly through the exchanges. This no­ti­fication does not include voluntary carbon trading. The Bureau of Energy Efficiency shall be the administrator, the CERC will be the regulator and the tra­ding of carbon credit certificates will happen at the power exchanges.

Cross-border trading: In July 2023, the Central Electricity Authority issued amendments to facilitate the cross-border transfer of power through the RTM segment of India’s power exchanges. As per the amendment, any Indian power trader, on behalf of any entity of a neighbouring country, may trade in the Indian power exchanges (in the DAM/RTM/ both DAM and RTM segments), after ob­taining approval from the designated au­thority, up to a specified quantum (MW) and duration, provided that the entity on behalf of which the Indian power trader is trading belongs to a neighbouring country that has signed an agreement for cooperation with India in the power sector, and the generating asset from which the power is being traded is also own­ed/controlled by the same country.

Ancillary services market: The CERC ga­ve its approval to the power exchange pl­at­forms to launch the tertiary reserve an­cillary service (TRAS) market segment in April 2023. The TRAS is a frequency con­tr­ol ancillary service capacity meant to ke­ep grid frequency within a specified ran­ge.


The MoP released a report titled “Deve­lopment of Electricity Market in India”, in May 2023, with recommendations for power markets, going forward. According to the MoP’s report, the recommendations are expected to addr­ess key issues, including the dominance of inflexible long-term contracts in the power sector, the need for resou­rce adequacy planning at the Centre and in the states, reducing system inefficiencies through reduced reliance on self-scheduling, increasing the share of renewables in the overall energy mix, encouraging market participation for renewables, and ensuring firmness in the procurement of ancillary services th­rough a well-developed ancillary ser­vices market. These solutions are aimed at creating an efficient, optimal and reliable market framework to enable the energy transition.

Efforts are also under way for the introduction of new products such as contract for differences, capacity markets, derivatives and ancillary markets in order to increase and optimise the reso­urces of buyers and sellers. Other initiatives and discussion areas include more products promoting clean energy, the introduction of new technologies such as battery energy storage systems in the supply chain for optimal utilisation of resources, bundling of thermal/hy­dropower stations with renewable energy and battery storage to provide flexibility in operation, and the promotion of charging infrastructure for electric vehicles.

Net, net, these developments are expected to pave the way for deepening the po­w­er markets in India and are expected to in­crease participation on the exchan­g­es.