Govt intervention creates uncertainty for IEX

India’s power ministry has requested the Central Electricity Regulatory Authority to initiate the process of coupling the country’s three power exchanges; Indian Energy Exchange (IEX), Power Exchange of India (PXIL) and Hindustan Power Exchange (HPX).

  • to ensure a uniformity in price discovery of energy at trading platforms.
  • this is expected to translate into better transparency, help to bring down power tariffs significantly and provide uniform price discovery across exchanges

Currently, buyers and sellers at each exchange do trading of electricity and discover spot price separately at these exchanges. After coupling of exchanges, the price discovery would be uniform.

IEX, with the largest market share of 88% is not happy with the announcement – as the change may take away it’s moat and put it in par with the competition.

Most analysts also believe that it’s significantly negative for IEX.

“Currently, IEX is the most trusted platform for electricity spot price determination in India, which is it’s business moat. However, introduction of a full-fledged market coupler implies an independent third-party will collate all buy/sell bids and derive a uniform market price across all exchanges,” domestic brokerage firm Nuvama said.

UBS however, expects no change to existing structure due to simple market coupling, but do expect impact on operations of the power exchanges.

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