Power market coupling will lead to loss of monopoly for IEX, says Singh of HPX

Electricity

Indian Energy Exchange (IEX) is likely to lose its monopoly with the implementation of market coupling, said Naveen Singh, Head of Policy Advocacy and Vice President of Business Development at Hindustan Power Exchange (HPX).

India operates three power exchanges - IEX, HPX, and Power Exchange India Ltd (PXIL). HPX is a power exchange in the Indian electricity market, promoted by PTC India, BSE and ICICI Bank.

Market coupling will lead to a single price for the power market, he told CNBC-TV18 in an interaction. He explained that price coupling which will lead to uniform prices across India, was pending for long and was under discussion.

Market coupling refers to forming of a single trading entity owned by the government where price discovery will happen with the item of trade getting dispatched to short-term trading platforms.

Read more | Market coupling casts a shadow on IEX. What should investors do?

He highlighted that a discussion will take place on how market coupling will be implemented in the power sector. But the industry is seen growing at 15 percent or higher, he added.

He sees a reduction of long-term power purchase agreements in power market and an increase in number of short-term agreements due to flexibility.

Singh said the market is well prepared for the change and it will take HPX about four-five months to implement this method.

He added that market coupling is crucial for other exchanges to increase their market share. He mentioned that all the volumes gained by these exchanges are from existing ones since they started operating.

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

He also explained that the decrease in volumes in the Day-Ahead Market (DAM) segments is happening because the dominant player is losing market share. Lastly, Singh mentioned that HPX holds a 35 percent market share in the Term Ahead Market (TAM) segment.

IEX enjoys a virtual monopoly in trading of electricity with around 90-95 percent market share, some market experts say. IEX is said to enjoy a near 100 percent market share in Day-Ahead Market (DAM) and Real-Time-Market (RTM) segments, which contribute 75-80 percent of exchange volumes.

Antique Stock Broking pointed out that a coupling operator will pose a new challenge for dominant exchanges like IEX. Incentives by competitor exchanges like HPX and PXIL can eat into volume growth, the firm said.