Buy, Sell and Trade: India will soon have Electricity OTC market

The over-the-counter market allows buyers and sellers to directly transact conventional and renewable electricity, and negotiate the price and contract

The Indian electricity market will have a new platform that could let any one buy, sell or trade electricity – both conventional (coal, gas hydro) and renewable energy (solar, wind). The over-the-counter (OTC) market allows buyers and sellers to directly transact electricity, and negotiate the price and contract.

Apex regulator Central Electricity Regulatory Commission (CERC) last week issued the guidelines for setting up an OTC platform in India, which the sector executives said would be the world’s first regulated OTC platform. The CERC in a 2017 order identified the need of a regulatory framework in India to help electricity consumers buy directly.

“At present, trading licensees are in place who can promote market for exchange of power. However, there is no platform for facilitating direct interaction between the buyers and sellers in the OTC market. In our view, there is a necessity to provide for a regulatory framework to promote the OTC market through direct participation of buyers and sellers to explore the untapped sources of power to meet the consumer needs,” it said in the order.

With the issuance of the registration guidelines now, any agency wishing to set up an OTC platform can apply for the same. In the latest guidelines, CERC has laid down the objectives of the OTC platform.

“OTC platform will provide an electronic platform with the information of potential buyer and seller of electricity; maintain a repository of data related to buyers and sellers and provide such historical data to market participants; and provide such services as advanced data analysis tools to market participants.

Currently, the Indian power market has long term power purchase agreements between power generators and power distribution companies, and several short- and medium-term contracts through power trading platforms and exchanges. DEEP portal by the ministry of power offers medium-term contracts for discoms to purchase power from gencos.

India has two electricity exchanges – Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL) which offer several types of electricity contracts – both for conventional and renewable electricity. “However, unlike a power exchange, the OTC platform will have no role in price discovery or in power trading, which is a unique function of the power exchanges,” said Rohit Bajaj, sr vice president and head-business development, IEX.

Bengaluru-based REConnect Energy, which was the main petitioner in the case submitted to the CERC for approving regulations for the OTC platform, said it has the potential to accelerate clean energy transition in the country.

“OTC platform will integrate rooftop, intra-state and inter-state energy markets in India where energy consumers can aim at efficient and transparent counterparty discovery along with meeting their sustainability goals,” said Vishal Pandya, co-founder and director, REConnect Energy. The company launched its intra-state (within state) OTC platform in 2016 – clickpower.in. With the CERC giving a regulatory nod, companies like REConnect can now operate inter-state and engage with a variety of suppliers and consumers.

Pandya said the entire energy ecosystem could stand to benefit from these regulations. “RE asset owners can accelerate their capacity addition plans, conventional gencos can make an efficient use of their surplus capacity, the bulk consumers could reduce their overall cost of energy by mixing various sources of energy including distributed energy resources, and the power traders can also maximise their trade volumes,” Pandya said.