Mumbai: India''s first national level power exchange, Indian Energy Exchange Limited (IEX) for trading electricity power exchange, proposed to be set up by Financial Technologies (India) Ltd and PTC India Ltd (formerly known as Power Trading Corporation of India Limited) has received approval from the Central Electricity Regulatory Commission (CERC).

Currently, short-term trading constitutes only 3 per cent of the total energy market as against over 15 per cent globally. The need for a power exchange has been felt for quite some time to meet the demand and supply of power on time and to provide a common platform to both buyers and sellers and to assist them in price discovery.

Power markets generally operate with power purchase agreements (PPAs) for long-term trading and bilateral contracts for the short term. For very short-term requirements there is the unscheduled interchange (UI). In future, these markets will be complemented by the exchange, which will have standard contracts, nationwide choice, better price and payment security.

IEX, promoted by Financial Technologies, is intended to be a pan-India neutral and transparent electronic demutualised exchange for efficient price discovery in the electricity market. PTC India Ltd has consented to take 26 per cent stake in IEX.

Other corporates who will to take a stake are Tata Power (TPC), Reliance Energy (REL) Rural Electrification Corporation (REC), Adani Enterprises (AEL) and IDFC in the consortium. Financial Technologies will continue to invite strategic partners to join the power exchange. Taking into account the nascent stage of exchange traded power market in India; Financial Technologies has designed a very innovative solution for the power sector by deploying the best-fit global technology solution for the Indian market to encourage larger participation by large and small players.

"The Indian power market still possesses a huge under-utilised captive capacity and massive growth potential which, if utilized, can go a long way in bridging the existing demand-supply gap," said PTC India Ltd CMD Tantra Narayan Thakur said.

Thakur added that these factors had contributed to creating a nation-wide consensus and favourable government directives towards need for development and reforms in the power sector. "I am confident that Financial Technologies'' proven expertise in setting up and operating exchanges globally will ensure efficient distribution and trade of electricity at par with global standards and best practices," he said

"As MCX, an affiliate of Financial Technologies, is already the most profuse platform for energy trading accounting for over 97 per cent of trading in crude oil and natural gas, we are sure all stakeholders who have converged to MCX for other energy products will show similar confidence in IEX for electricity," Thakur added.

In India the scope of trading power is huge even with the current power shortage. There is an imbalanced disposition of resources within the country. On the one hand the eastern region, which is rich in coal sources, has pithead based load plants.

The north-eastern region also holds a lot of hydropower potential, whereas on the other hand, the western and northern regions of the country suffer from a heavy deficit of such power due to their immense industrial and agricultural load. IEX will be the key change agent for distributing power for bridging the gap between demand and supply by uniting all the buyers and sellers on a single platform to trade at a common national price without any risk of counter party, which will be guaranteed in the exchange mechanism

Financial Technologies says IEX promises multi-fold benefits for the Indian electricity supply industry by creating a non-discriminatory marketplace with a pan-India access to all buyers and sellers. IEX will ensure a transparent price discovery mechanism along with providing various other services such as settlement, payment security and technology for trading and risk management. It will enable participants to trade electricity the subsequent day through standard hourly contracts and block contracts that permit them to draw power from the grid at a given hour.

Going forward, IEX has conceptualised products to meet the requirements of the power sector, based on the feedback received from the trade during the last one-and-a-half years. The power exchange will benefit market participants such as the generators, distribution licensees, open access users, trading licensees, industrial consumers, system operators and bankers in many ways.

According to plans IEX would act as a single point self-regulatory organization (SRO), supervising its users and ensuring neutral and transparent national level pricing for all.

IEX promises to bring to the Indian electricity market:

• Trade transparency: All prices and quantities will be displayed on IEX trading terminals across India, and all trades will be anonymous and guaranteed by IEX. This will encourage participants to use the exchange mechanism, which will be neutral and transparent.
• Cost-efficiency: Participants will have the flexibility to trade in the desired quantity at the desired price and desired time, without additional overheads. Cost of transactions will be lower, whereas safety and equality will be much higher.
• Price-risk management: Trades on IEX will provide long-term and short-term price signals to enable participants to make suitable sell/buy decisions.
• Unlocking value: IEX will unlock a deep and liquid market that will promote competition among stakeholders and lead to better capacity utilisation and smoothening of prices for consumers. It will attract additional capacity by providing a readymade market to interested parties.