By Vivek Singla, Managing Director and Chief Executive Officer, Power Exchange India Limited
India’s short-term electricity market has achieved remarkable growth over the past 15 years. Supportive policies and continuous innovation by power exchanges have helped short-term power transactions grow from about 66 BUs in FY 2010 to nearly 240 BUs in FY 2025, representing a strong CAGR of 8.4 per cent. Power exchanges have been central to this journey by bringing transparency, competition and nationwide access to power procurement.
Yet, a major structural gap remains. Despite this growth, only about 7-8 per cent of India’s total generation is currently traded through the power exchanges – Indian Energy Exchange, Power Exchange India Limited (PXIL) and Hindustan Power Exchange. The bulk remains locked in long-term bilateral contracts or settled through the deviation settlement mechanism. This highlights the significant opportunity to deepen market participation and expand the role of competitive power markets in India.
As India progresses towards becoming a developed economy, it needs a cleaner grid, optimal transmission usage and a robust grid with the ability to handle the scale and variability of renewable energy and deeper market reforms. Market coupling is the natural next step. It brings together the efficiency, flexibility and depth that this transition demands.
The Central Electricity Regulatory Commission’s (CERC) decision to appoint Grid Controller of India Limited (GRID-India) as the market coupling operator is neither sudden nor arbitrary – it is a well-thought-out decision. It is the outcome of a five-year process, backed by a lawful exercise of power market regulatory authority, shaped by extensive stakeholder consultations and feedback, validated by the shadow pilot and years of groundwork. This is careful and well-considered policymaking.
What market coupling actually solves
As the power market matures, certain structural realities demand attention: rising renewable penetration requires centralised optimisation; transmission corridors should be utilised optimally; buyers and sellers need deeper liquidity; and credible national-level price signals are essential to guide long-term investment.
Under the current “closed bid” process, participants are hesitant to trade on illiquid exchanges owing to the risk of power not being scheduled, in the wake of lower liquidity and a shift toward the most liquid exchange. This market design has created a self-reinforcing concentration that limits effective competition. These are not isolated challenges – they are interconnected imperatives of India’s energy transition.
Market coupling addresses these challenges in one move. By aggregating bids across all exchanges and determining an optimal clearing outcome through a centralised algorithm, coupling delivers the efficiency the market needs while allowing exchanges to keep competing where it matters most: service, technology and innovation.
Specific benefits are measurable and multi-dimensional:
Level playing field: Uniform pricing eliminates the liquidity advantage that has historically disadvantaged some exchanges. Competition then shifts to service quality, innovation and participant experience, areas where exchange platforms should compete.
Price convergence: A single market clearing price removes price differences across exchanges and ensures that the same unit of power has the same price regardless of which exchange received the bid. This transparency lowers transaction costs, strengthens confidence among market participants and provides clearer market signals for investments in generation, procurement, storage and transmission planning, thereby supporting more informed and strategic decision-making. Uniform pricing lowers procurement costs and eliminates the need to monitor multiple exchange prices simultaneously.
Increased liquidity and market depth: Pooling bids from all exchanges clears more volume than each exchange working alone. This will make price discovery more efficient, transparent and reflective of system-wide demand and supply. Uncleared supply on one exchange no longer goes unmatched when demand exists elsewhere, the algorithm routes it efficiently. Capacity contracts, once introduced, will provide an important opportunity to bring additional volumes into transparent and competitive market platforms, thereby strengthening overall market liquidity and participation.
Enabling derivatives: A single, credible reference price is the basic building block for financial derivatives in electricity – tools that industry and discoms need to manage price risk over the long term.
Promotes competition: Market coupling is fully aligned with the core objective of the Electricity Act, 2003 – to foster competition, efficiency and consumer benefits. A common market-clearing framework allows exchanges to compete where it matters: services, technology and market development.
Lowering the cost of power for consumers: With market coupling, more bids will match across all exchanges, resulting in deeper liquidity and clearing higher volumes. For consumers, that translates directly into lower procurement costs.
Key enabler in India’s energy transition
India’s energy landscape is transforming rapidly – 500 GW of renewables, green hydrogen, utility-scale storage, electric vehicle adoption and digital grid infrastructure are no longer future projections; they are active policy commitments. In this environment, electricity markets must do more than clear trades – they must allocate resources optimally, price risk accurately and send investment signals with clarity.
Market coupling, implemented with sound institutional design and genuine stakeholder collaboration, positions India to meet this moment and to build a power market that is not just nationally efficient but globally benchmarked.
Market coupling in electricity markets should not be compared directly with the functioning of stock exchanges or platform-based businesses. Unlike financial markets, where participants often have significant visibility into market depth, traded volumes and prevailing price signals, electricity market participants make procurement and sale decisions under unique operational, transmission and balancing constraints. Therefore, the concept and design of market coupling in the power sector should be evaluated based on power system efficiency, grid security, renewable integration and consumer welfare, not by how other markets work.
Market coupling is ultimately about who benefits – and the answer is: everyone in the electricity value chain, especially the end consumers.
CERC’s decision to appoint GRID-India as neutral and robust market coupling operator
For market coupling to deliver on its full promise, the market coupling operator framework must rest on three clear foundations: neutrality, technological robustness, and institutional independence and governance, and the CERC’s appointment of GRID-India satisfies all three.
Neutrality: As a government-owned system operator with no commercial stake in any exchange and power trading, GRID-India is structurally insulated from market conflicts – the only institution for a price-setting function that all participants can trust equally.
Technological robustness: GRID-India has already delivered several large-scale initiatives, such as the National Open Access Registry, the centralised web-based scheduling system, and the tertiary reserve ancillary services platform.
Drawing on this experience, its platform will be scalable, resilient, secure and capable of handling what comes next, including ancillary services, storage participation, cross-border trade and advanced optimisation models.
Institutional independence and governance: The governance framework of GRID-India will rely on clearly defined protocols, transparent algorithms and clear accountability. The integrity of the market price simply reflects the integrity of the institution itself.
Role of exchanges in a coupled market: Market coupling strengthens the role of exchanges as they will lead the way in finding new customers, designing new products, updating technology systems and improving overall user experience.
A forward-looking reform for India
The regulatory direction is very clear and well-established. Market coupling is not a regulatory fix or an operational upgrade – it is a strategic national market design initiative. Its goal is to build a unified, resilient and future-ready electricity market architecture that lowers cost, makes better use of resources, strengthens grid reliability, and ensures equitable access for every stakeholder across India’s power ecosystem.
India’s power sector reforms have always succeeded when institutions, regulators, exchanges, system operators and market participants have collectively aligned towards national goals. PXIL, as a promoter-driven exchange with the backing of the National Stock Exchange, National Commodity and Derivatives Exchange Limited and other stakeholders, has consistently championed market integrity, transparency and participant diversity, and has rightfully played its role as a market infrastructure institution in the electricity space.
The next phase of power market reform will focus on closer integration of market-based price signals with system-wide economic despatch. A progressive convergence of the security
constrained economic despatch model and exchange-based market mechanisms has the potential to unlock untapped generation capacity, increase traded volumes and deliver significant efficiency gains across the power sector value chain. Market coupling should be seen as an evolution, not a disruption. It is the next reform in India’s electricity market continuum, and arguably the most impactful one.
A uniform clearing price across all exchanges is not merely a regulatory reform – it is the foundation that India’s energy transition