Initial simulations by CERC suggests market coupling will not have any significant benefit: IEX CMD

IEX shares fell 5 percent intraday on February 7, a day after the Central Electricity Regulatory Commission (CERC) ordered for a shadow pilot on the market coupling of India's power exchanges

The Indian Energy Exchange Ltd (IEX) on February 7 said it is hopeful for another round of stakeholders' consultation once the shadow pilot on market coupling is done. IEX Chairman and Managing Director (CMD) Satyanarayan Goel said initial simulations of market coupling by the Central Electricity Regulatory Commission (CERC) did not show any significant benefits.

"IEX welcomes directions by the CERC regarding the shadow pilot study on market coupling. After examining the stakeholders' suggestion on the CERC staff paper on market coupling dated August 21, 2023, the Commission carried out simulations for coupling in the day-ahead market (DAM) and real-time market (RTM), and no significant benefit was observed," Goel told Moneycontrol.

Of all the electricity that is traded in the Indian power exchanges, IEX has a share of about 90 percent. Power exchanges offer different products such as DAM, RTM, term-ahead market, green-dam and so on. DAM and RTM contribute 75-80 percent of the country's total exchange volumes, of which IEX holds nearly 100 percent market share.

MC Explains | What is market coupling and why is it in the news?

Market coupling, once implemented, is likely to reduce the dominance of IEX in terms of market share. IEX has been against market coupling saying the interpretation of the system can kill innovation and competition in the sector.

Goel said one of the suggestions received was for coupling RTM with Security Constrained Economic Dispatch (SCED) and simulation studies of this indicated marginal benefit under this alternative.

The CERC order, seen by Moneycontrol, however, also stated that coupling RTM and SCED would help increase the depth of the market while ensuring system reliability. "Based on the simulation results presented by the staff, the Commission is of the view that the proposed coupling of RTM with SCED may enable harnessing of the unutilised generation, serving the unmet demand and resulting in significant cost optimisation," read the order.

IEX says market coupling will kill innovation, move akin to clubbing Ola, Uber

Goel said, "For a detailed analysis CERC has now directed Grid-India to carry out simulations in the next six months for different alternatives considering operational, market and regulatory aspects of the implementation."

He added that the CERC order is only for a pilot study and a final view will be taken based on the outcome of the study and consultation with stakeholders thereafter.

IEX shares fell 5 percent intraday on February 7, a day after the Central Electricity Regulatory Commission (CERC) ordered for a shadow pilot on the market coupling of India's power exchanges. At 2:35 pm, the stock was trading at Rs 145.15.

Satyajit Ganguly, MD & CEO of Power Exchange India Limited (PXIL), said market coupling will facilitate in creation of an integrated and efficient electricity market that supports the growth of multiple power exchanges and enlarges their role as ‘Market Infrastructure Institution’.

“It would lead to a level playing field for all power exchanges in DAM & RTM. PXIL welcomes CERC’s move, which will result in an innovative and healthy competition environment in the Indian power market,” he said.

Ganguly added that the mechanism of market coupling will integrate the bids of market participants, who may choose to participate in multiple exchanges. “This will allow them to avail benefits of multi-power exchange model but with the discovery of single common price based on merged bids of the combined market,” he said.

The other power exchange, Hindustan Power Exchange Limited (HPX), did not respond to Moneycontrol's query at the time of filing this report.