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Indian Energy Exchange Ltd (IEX), India’s first-ever power exchange that received its approval from the Central Electricity Regulatory Commission (CERC) commenced operations today.
Indian Energy Exchange Ltd (IEX), India’s first-ever power exchange that received its approval from the Central Electricity Regulatory Commission (CERC) commenced operations today. The Exchange received bids for 13,176 Mwh of power today and the matched power was cleared at Market Clearing prices between Rs.6.46/kwh and Rs.8.01/kwh for the different hours of the market. The power will now be scheduled on June 28, 2008 as IEX is trading day ahead power currently. Over 50 members and users have been identified for participation in phase 1. Based on the membership and client compliances done by others, we expect this number to double soon. Major members and clients who participated today were from Maharashtra, Tripura, West Bengal, Karnataka and Madhya Pradesh.
Mr. Venkat Chary, Chairman, IEX said that “It is highly satisfying to see IEX go live as hard work of entire industry has paid off with the commencement of power trading today in the country. I am sure the Ministry of Power, CERC and the entire industry is feeling happy today with the going live of IEX as India joins the select group of developed countries which have power trading markets.”
Mr. Pramod Deo, Chairperson, CERC said that, “I am happy to know that India’s first national-level power exchange i.e. Indian Energy Exchange (IEX) is commencing its operation today. The Central Electricity Regulatory Commission has issued the guidelines for setting up power exchanges, with the objective of fulfilling the mandate given in the Electricity Act, 2003 for developing competitive power markets in the country. The operation of power exchanges has become feasible due to transparent and non discriminatory inter-State open access regime implemented by the Commission”.
He further added that, “promoting competition, I am sure, would result in long-term benefits to the consumers, as has been the experience in other sectors. It is also expected that the power exchanges in the country would also enhance confidence of the private investors as the exchanges would provide ready platform for sale of power with necessary payment security. I wish all the success to IEX”.
Mr. Jignesh Shah Chairman & MD, FTIL expressed his satisfaction on having created the first electricity exchange in the country and commented that “IEX is a market place infrastructure project and we are happy to be a part of this developmental strategy of the Government to carry on market reforms and build nation-wide support infrastructure for providing market access. This strategy will encourage power companies to come up with more surplus merchant power capacities and also attract new investments to meet India’s growing power requirement.”
Mr. Jayant Deo, MD & CEO, IEX mentioned that “The true spirit of the Electricity Act 2003, of creating “Competitive Power Market” is initiated today through IEX platform. The electricity price discovery on the IEX physical market will provide a transparent, credible and secure reference price for other physical market trades, of the entire power sector.”
IEX has been promoted by Financial Technologies (India) Ltd and PTC India Ltd, and its key stakeholders include Adani Enterprises, Infrastructure Development Finance Company (IDFC), Lanco Infratech, Reliance Energy, Rural Electrification Corporation (REC), and Tata Power Company.
FTIL is a leading provider of transaction automation technologies for Equities, Derivatives, Forex and Commodities market and specializes in delivering breakthrough innovative solutions for digital transactions.
IEX has been successful in creating awareness of the exchange and its benefits to the power sector which is visible from the overwhelming response received by it in the membership drive. IEX also has state of the art trading software which has been provided by NASDAQOMX of Sweden and Financial Technologies India Ltd.
IEX will operate initially a day-ahead market based on closed auction, double-side bidding and clearing at uniform price. It proposes to offer other products in the second phase of operations.
The need for a power exchange has been felt for quite some time by the buyers and sellers to better meet the demand and supply of power at the most appropriate price at national level. The Exchange will aid the buyers and the sellers by bringing power industry participants together to buy and sell electricity in an auction based system, which will create a national level price discovery.
The enactment of Electricity Act 2003 has the objective of creating competitive environment in Indian power sector. Based on this objective, the first initiative was taken in the form of Open Access Regulations issued by CERC in 2004. The number of participating utilities in STOA has shown significant rise from 45 in 2004-05 to 89 in 2007-08, with a CAGR of 25%. During April’07 to March’08, a total volume with 6369 MUs transactions in Day-Ahead and Same Day market were carried out.
The UI mechanism which acts as a balancing market and a tool to sustain grid stability, has shown a steep rise in the billed amount during last 5 years from Rs. 892 Crores in 2002-03 to Rs. 8368 Crores in 2006-07, with CAGR of 75 %. The Ceiling rate of UI has also increased from Rs 5.70 to Rs 10 per unit, which would also push the trade to the exchange.
The next most needed step towards creating competitive environment in Indian power sector, after Open access, was Power Exchange. As we are well aware that Power Exchanges around the globe are performing in a very effective manner and are successful in creating an efficient power pricing market. Power exchanges in Europe are most known for their auctions that run one day ahead of delivery for every hour of the next day. These exchanges also organize intra-day trade and even continuous financial markets for monthly, quarterly and annual futures contracts. Power next in France, APX in Netherlands, and EEX in Germany & Nordpool in Scandinavia are few examples of successful Power Exchange across the globe. The volume in major European power exchange has grown from 3832 BUs in 2000 to 8244 BUs in 2005, which is roughly 40% of their total power consumption. In year 2007, NORDPOOL traded 290 BUs, EEX, Germany 124 BUs and Power next, France traded 44 BUs on their spot exchanges.
IEX will ensure that it aids true national level price discovery for the Indian users and producers and it will also motivate much needed investment in this capital intensive sector and consequent capacity addition, as it provides a common marketplace with a nationwide reach and market driven prices with payment security. Creation of market enables environment in which merchant power plants are added and greater capacities are created to sell some quantity in short term market.
About IEX:
Indian Energy Exchange (IEX) is India’s first-ever, nationwide, automated, and online electricity trading platform. IEX received approval from the Central Electricity Regulatory Commission on August 31, 2007 for establishing the Power Exchange. The exchange will be demutualized, and offer complete neutrality, and transparency in transactions. It will offer Day Ahead Market (DAM) with double-sided closed, hourly and block order, scheduling and transmission capacity reservation support, daily settlement and secured payment. It also proposes to offer other forward products on a week-ahead and month-ahead basis in the near future.
Financial Technologies, one of the promoters of IEX, has also tied up with OMX Technology, the technology provider of the world’s leading power exchange (NORDPOOL). Financial Technologies and OMX will together provide technology support to IEX. FTIL and PTC are the promoters of IEX and the other important shareholders of IEX include IDFC, LANCO, Adani, Reliance Energy, Tata Power, and REC.
