• Sun. Oct 6th, 2024

IEX shares dropped by 12% after a reports.

ByNishat Manzar

Sep 24, 2024

This power exchange market coupling is claimed to be in pipeline for India by FY 2024-25 of the government that is in the Indian power sector. This change has reduced the stocks of the Indian Energy Exchange – IEX, a leading electricity trading platform in India.

Market coupling is a model in which the buy bids and sell bids of all the power exchanges in the Indian market will be summed up while seeking the common MCP. This means that at any one time the electricity to be traded through these exchanges will have only one price.

The report also reveals that since the government’s Power Ministry has charged the Grid Controller of India (Grid-India) with the responsibility of fulfilling the pilot study for market coupling, it must act as planned. After the study is complete, the Central Electricity Regulatory Commission (CERC) will determine the implementations.

There are two fundamental reasons why the government wants to encourage market coupling. Firstly, there is a desire to increase the share of power exchanges in the total turnover in electricity in the country. Today, the biggest share of electricity trade happens through a tool called power purchase agreements (PPA), with the term ranging at most a quarter of a century. The government also wants to decrease the share of these predominantly long-term PPAs and increase trading on the power exchanges.

Secondly, the uniform MCP mechanism under market coupling is anticipated to foster higher level of transparent and efficient in power trading. Pooling of all buy and sell offers for electricity across the different exchanges of the market will aid to arrive at one transparent price level that is to the bargaining of buyers and sellers.

Some of the news articles involved are IEX: government plans to implement market coupling drive shares Operations of IEX fucked by govt plan Agree to disagree on market coupling: Government plan to implement market coupling on IEX hits shares. To this change, the one that bears the highest risk is IEX which is the leading power exchange in the country. Currently, NSE Price – IEX has declined by more than 12 percent below the 52- week high price of the shares in the market.

It is for this reason that investors, and specially analysts are paying close attention to the evolution of market coupling as this could set the tone for changes in other sectors especially the power sector. The government’s action may still be guided by the goal to enhance the overall efficiency and transparency of electricity trading at the power exchanges including IEX.

As for the market coupling plan, it has only study and pilot stage up to this year and its finalization and subsequent implementation will depend upon the recommendations under Grid-India and approval of CERC respectively. However, the news in question has already triggered reactions across the power trading market and it was felt primarily on IEX shares.

Together with the ongoing changes in the power sector, the government initiative towards market coupling could become the beginning of the new stage in electricity trading in India.