Electricity Futures soon on 2 key exchanges, NSE also receives SEBI Approval to launch E-Futures

NSE receives SEBI Approval to Launch Monthly Electricity Futures

Securities and Exchange Board of India (SEBI) has given approval to NSE to launch monthly electricity futures contracts. Earlier SEBI had allowed MCX to launch electricity futures. This is expected to deepen power markets and support long-term structural reforms initiated under the Electricity Act, 2003.

NSE believes the launch of monthly electricity futures by NSE will provide market participants with effective hedging tools against electricity price volatility. It will also enable more accurate price signals in the power sector and encourage capital investments across the electricity value chain from generation, transmission, distribution, and retail.

Ashishkumar Chauhan, MD & CEO, NSE said, “This approval is only the beginning of NSE’s vision for a broader electricity derivatives ecosystem. Plans are underway to gradually introduce contracts for difference (CFDs) and other long-duration electricity derivatives such as quarterly and annual contracts subject to regulatory approvals”.

It will be a financially settled futures contract and will allow participants to hedge their risks effectively. While a robust day-ahead spot market will ensure reliable price discovery.

NSE was the first stock exchange in India to establish an electricity exchange, launching Power Exchange India Limited (PXIL) in 2008. NSE will have the advantage of strong understanding of both spot and derivatives markets.  NSE is believes it is uniquely positioned to build an integrated and liquid electricity derivatives market.

As per Niti Aayog report, India’s journey toward achieving its net-zero emissions target demands substantial investment. It is estimated that over $250 billion year on year till 2047. By 2030, renewable energy sources such as solar and wind are expected to contribute over 50 per cent of the nation’s installed power capacity.

Hence a robust and dynamic electricity derivatives market is essential to attract this scale of climate finance from both domestic and global investors. A calibrated and phased approach will ensure both market integrity and investor confidence. It is crucial for the spot and futures electricity markets to evolve in tandem to create a virtuous cycle of liquidity and stability.

NSE said it is committed to working closely with all market participants, regulators, and stakeholders to align efforts around enabling policies such as Market-Based Economic Dispatch (MBED) and market coupling initiatives by CERC, as well as SEBI’s framework on CFDs.

In February, SEBI had informed to exchanges about understanding reached between SEBI and CERC and asked interested exchanges to apply for electricty futures contracts.

Moneyconrol had reported on April 15, that top exchanges have applied for the electricity futures contract with SEBI.