The Term Ahead Market on Indian energy exchanges has grown from about 6 per cent of the total power traded two years ago to about 17 per cent in November. If this trend is any indication, the TAM is poised to grow much bigger.

Prabhajit Kumar Sarkar, MD & CEO, PXIL, told BusinessLine , “The power market has been witnessing a silent shift over the last few months. The Term Ahead Market, which has always been a smaller segment of the exchange traded power transactions as compared to transactions in the Day Ahead Spot, has finally started to acquire heft.”

A further boost is expected once the Supreme Court gives assent to the resolution of the jurisdiction adopted by CERC and SEBI, based on which CERC would regulate physical delivery contracts and SEBI would regulate financial contracts. This would allow contracts of tenures spanning weeks and months to be available on the power exchanges thus changing the dynamics of the market even further.

“While the segment itself has grown and is expected to grow further, what is also interesting to note is the growth of PXIL’s market share from 30 per cent in this segment to more than 70 per cent over the last few months,” he said.

The Term Ahead Market comprises of various contracts ranging from intra-day to the weekly. The delivery timelines of these contracts range from delivery within three hours of being transacted to delivery upto eleven days from being transacted. These contracts are bracketed together as they are scheduled under the Short Term Bilateral Open Access Regulations as compared to the Day Ahead Spot (DAS) and the Real Time Market (RTM), which are scheduled under the Short Term Collective Open Access Regulations.

Green TAM

The second major trend is the renewable segment and the Green TAM contracts making their presence felt on the exchanges. This segment is also expected to grow over the next few months as more renewable capacities come on stream with some portions being kept for merchant transactions as well.

Sarkar said, “PXIL has been ready with the Green TAM contracts since July 2020. We are however still awaiting the regulatory hearings to resume for appropriate approvals to be received, so that we may also offer these contracts to participants immediately. Most participants have been seeking competition in this segment as well and have been keenly awaiting our presence.”

The growth of the segment is attributed to the availability of transmission corridors. The TAM segment has gained as it allows the buyers to benefit from the certainty of both the supplies as well as the surety of the prices being locked in for a relatively longer duration compared to transactions in the collective segment. The draft Power Market Regulations 2020 seeks to address this structural issue by implementing the idea of price coupling, which would create a single price after collating the order books from all the power exchanges.