CERC Moves On Pilot Project For Market Coupling

Reports have confirmed that the Central Electricity Regulatory Commission (CERC) has ordered for a shadow pilot on market coupling of India's power exchanges. The news confirms  what has been suspected for long, that despite protestations of IEX the premier power exchange, and many other stakeholders, the government is determined to push ahead with market coupling for power trading. The term refers to a model where buying and selling of bids for all three power exchanges will be aggregated into a uniform market clearing price for selling every day.

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In a February 6 notice, CERC said that Grid India will develop the necessary software over the next two months to run a shadow pilot for market coupling of the three power exchanges - Indian Electricity Exchange (IEX), Power Exchange of India (PXIL) and Hindustan Power Exchange (HPX). Post the pilot, the exchanges will share data and information with the CERC to decide on the benefits of coupling.

Interestingly, the CERC has been at pains to stress that the results of the shadow pilot run shall not have any effect on the price and volume discovery in the actual real time market (RTM) and day ahead market (DAM) of the power exchanges. It also stated that the trial run will not impact the final schedule and settlement for any entity during the trial period.

IEX stands to lose the most from a move to market coupling, as it has a dominant market share of 90% plus, and stands to lose the most if prices across markets are the same. The firm's high flying stock has also suffered from the announcement, seeing a significant drop in valuation, ever since the government made it in August last year.

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CERC had subsequently shared a draft paper on market coupling, inviting comments from stakeholders, where it appears the dominant view was actually against proceeding with the same. However, that has clearly not deterred a determined government.