Power exchanges in India, despite operating for 15 years, continue to account for below 10 per cent of total electricity trade. The existing market structure, with multiple exchanges maintaining fragmented order books and conducting parallel price discovery for the same delivery period, has constrained competition. It has also distorted incentives and led to inefficient utilisation of transmission capacity. The growing renewable penetration and sharper intra-day demand-supply variations have made efficient, least-cost dispatch increasingly critical for grid stability and consumer benefit.
To address these challenges, the Central Electricity Regulatory Commission (CERC), in February 2024, directed the implementation of a shadow pilot on the power system and cost optimisation through market coupling. Following this, Grid Controller of India Limited (GRID-India) submitted its “Feedback Report on D+1 run of Shadow Pilot on Power System & Cost Optimisation through Market Coupling”, covering the period from December 1, 2024, to March 31, 2025. Based on the key findings of this report, the CERC has now issued a suo moto order on market coupling in July 2025.
Background
The shadow pilot on market coupling, which was undertaken for a four-month timeframe, provided key insights across the day-ahead market (DAM), real-time market (RTM) and RTM with security-constrained economic dispatch (RTM-SCED). In the case of DAM coupling, overall welfare improved by Rs 380 million (0.3 per cent), with cleared volumes rising by 52 MUs (0.2 per cent), and a negligible impact on prices owing to skewed liquidity, while welfare gains were observed consistently across sessions. For RTM coupling, the welfare gain stood at Rs 7.2 million (0.01 per cent), with an additional 1.54 MUs (0.01 per cent) cleared, again with negligible impact on prices. The RTM-SCED coupling delivered the most significant benefit, achieving daily net savings of Rs 14 million, alongside reduced aggregate system costs. However, it also led to a marginal increase of Re 1 per MWh in the average cost due to lower demand served, while average clearing price volatility reduced under the coupled framework.
Coupling roadmap
The CERC order outlines a phased roadmap for market coupling. The coupling of the DAM across power exchanges will be implemented in a round-robin mode by January 2026. Under this framework, each exchange will act as the market coupling operator (MCO) on a rotational basis, with GRID-India serving as the fourth MCO to provide backup support and conduct independent audits. This design is intended to ensure the smooth functioning of power exchanges while reinforcing the confidence of market participants. RTM coupling will be taken up at a later stage, once sufficient operational experience has been gained from DAM coupling.
The CERC has also noted that the current methodology used in GRID-India’s shadow pilot for RTM-SCED coupling requires further examination, and that some of its complexities could be resolved through targeted regulatory interventions and stakeholder consultations.
In addition, the feasibility of coupling the term-ahead market, including contingency contracts, will be studied through a three-month shadow pilot. GRID-India has been directed to develop the necessary software for this pilot and submit a feedback report on its operational performance to the CERC thereafter.
To facilitate this transition, the CERC has instructed its staff to begin consultations with GRID-India and power exchanges on the operational and procedural aspects of DAM coupling, and to draft the necessary regulatory amendments. Power exchanges, in turn, have been directed to provide all data and information required for the analysis.
Impact
India’s power exchanges often see divergent prices, with sharp drops on one platform during high-wind nights or solar-heavy afternoons, while others stay elevated. Such gaps result in arbitrage as buyers chase cheaper platforms. Market coupling will eliminate these discrepancies by creating a single clearing price, simplifying procurement, improving cost predictability, and reducing administrative burdens for discoms and industries. Exchanges will then compete not on price but on services, digital innovation and lower margins, creating a win-win for buyers and sellers.
Beyond efficiency, coupling aligns with broader reforms like the market-based economic dispatch, aimed at least-cost, pan-Indian dispatch, and integrates with the green day-ahead market and renewable energy certificates, ensuring uniform price signals for renewable integration and compliance. It will also improve ancillary services through the transparent procurement of reserves and, in the long term, facilitate cross-border electricity trade via a single reference price. A uniform price point will further provide a benchmark for electricity derivatives, enabling advanced financial instruments.
Implementation, however, requires a harmonised market clearing engine across all exchanges, aligned algorithms and product definitions, strict data security and clear settlement frameworks with audits to ensure transparency. With the CERC adopting a collaborative approach, market coupling is positioned as a transformative reform to drive efficiency, transparency and integration in India’s power markets.
Aastha Sharma