With long-term power purchase agreements (PPAs) drying up, the new power exchange being set up by Bombay Stock Exchange, PTC India and ICICI Bank is looking to disrupt the power-buying landscape: going forward, selling on the spot market could be the only way for stressed power generators.

“India is growing, and merchant power is increasing because traditional ways of distribution (of power) and collection of money are not conducive. So you require a platform that will allow you to transact power on a near-delivery basis instead of having long-term contracts,” Ashishkumar Chauhan, Managing Director and CEO of BSE, told BusinessLine .

Chuahan added that other industry players will soon be invited to pick up equity stake in the power exchange; the BSE, PTC and ICICI Bank will remain minority shareholders under the sector regulations and CERC guidelines.

The BSE, PTC and ICICI Bank had earlier this month filed a petition with the Central Electricity Regulatory Commission (CERC) for grant of licence to set up a power exchange.

A report by India Ratings and Research released on Thursday noted that PPA tie-ups existed in fewer than 50 per cent of projects under construction with 28,000 MW of operating capacity.

Competition to intensify

“The competition in the short-term market is likely to intensify if there are delays in addressing (industry) issues and absence of long-term PPAs,” the agency said.

According to Chauhan, although there are currently two power exchanges, given India’s size, there is still scope for more exchanges.

Considering the current volatility in the spot power market — just this week, prices shot up to ₹14 per unit on Tuesday and dropped to ₹9.50 per unit on Wednesday on the India Energy Exchange (IEX), the country’s largest power bourse — there is a need for a “smoothening of the volatility” by finding new types of contracts and new trade instruments “to ensure that consumers are able to get power at reasonable rates and producers also get reasonable returns”.

Private equity-backed IEX and Power Exchange India Ltd (PXIL), promoted by the National Stock Exchange and the National Commodity & Derivatives Exchange Ltd (NCDEX), are the only two power exchanges operating currently. Both exchanges offer the opportunity to trade in electricity contracts, Renewable Energy Certificates and ESCerts (Energy Saving Certificates).

IEX increased its daily trade volumes in the day-ahead market from 20 million units in 2008 to over 200 million units in 2018, according to company’s FY18 annual report. The company, which went public last year, reported ₹131-crore net profit in FY18.

While IEX dominates the day-ahead market and term-ahead market, with around 97 per cent share, PXIL, also founded in 2008, continues to incur cash losses.

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