The National Stock Exchange on Thursday said that with the launch of electricity futures contract, prices in the spot market are expected to come down. It will announce the launch date in next 2-3 weeks.
“We have all approvals in place. We are talking to all stakeholders. Our internal team is fully prepared. Within 2-3 weeks we will announce the launch date,” Harish K Ahuja, Head of NSE head of sustainability, power, carbon markets and listing at NSE said. The monthly contract will become functional shortly after the launch date is announced.
“It will commence on the first business day of every month and expire a day before the contract ends,” he said while adding that the monthly contract will be available throughout the year. The lot size of the one-month electricity futures contract will be 50 MWh, which is equivalent to 50,000 units of electricity in one contract. The price will be decided by taking the 30-day weighted average spot price of the three energy exchanges — Indian Energy Exchange Ltd, Hindustan Power Exchange Ltd and HPL Electric and Power Ltd.
Buyers and Sellers trade in power exchange for meeting their power requirement. Power exchange enables delivery of power up to 90 days / 12 weeks / 3 months ahead. Whereas electricity future is a financial contract introduced by NSE where buyers and seller lock-in price today for future deliveries co-terminus with physical delivery executed on PXIL. On expiry of futures contract the financial settlement takes place at settlement price.
The monthly electricity contracts will have 50MWh as the trading unit, Re 1 per MWh as tick size and the maximum order size of 2,500 MWh. Besides, the NSE is exploring a contract for difference (CfD) that enables renewable projects to achieve stable revenue.
To promote the product, NSE Chief Business Development Officer Sriram Krishnan said the exchange plans to waive off transaction charges on trading of electricity futures contracts for the first six months after launch. Last month, NSE received approval from the Securities and Exchange Board of India (Sebi) to launch monthly electricity futures contracts.
India’s journey toward achieving its net-zero emissions target demands substantial investment, estimated at over $250 billion year-on-year till 2047 as per the Niti Aayog report. By 2030, renewable energy sources such as solar and wind are expected to contribute over 50 per cent of the nation’s installed power capacity.
NSE was the first stock exchange in India to establish an electricity exchange, launching Power Exchange India Limited (PXIL) in 2008.