POWER SECTOR

IEX celebrates first successful decade of operations

Energetica India

Presently, the exchange has 6000+ participants registered across electricity, REC and ESCert segments comprising distribution utilities, generators, large consumers and several renewable energy generators.

The Indian Energy Exchange (IEX) completed its first successful decade of operations on June 27, 2018. Incepted on June 27, 2008, the exchange has been playing unique and pioneering role in evolution of the power market. The competitive and robust price discovery coupled with the flexibility of procuring and selling power for each 15 min time block has helped the distribution utilities and large consumers manage their demand more efficiently as well as optimize their cost of procurement. The power markets as well as the exchange have indeed come a long way over the last ten years. Presently, the exchange has 6000+ participants registered across electricity, REC and ESCert segments comprising distribution utilities, generators, large consumers and several renewable energy generators.

On this momentous occasion, the exchange also launched a special book on ‘IEX: Empowering Markets’ which examines the sectoral landscape that translated into the landmark Electricity Act, 2003, which laid down provisions for market development in power sector and how this culminated into creation of the exchange in 2008. With a decade of experience and several accomplishments under its belt, the power markets in India are still at nascent stage with vast potential for growth. With enablers such as large addition of generation capacity, robust transmission system and increase in demand for power as undertaken by the Government of India, the market is indeed set for new phase of growth and development going forward as another special highlight, the occasion would feature ‘IEX Excellence Awards 2018’.

Instituted for the first time, through these awards the exchange endeavors to recognize, acknowledge its stakeholders including members and clients who have contributed significantly in the journey over the last one decade. The awards have been categorized under ten categories such as: highest electricity volume traded by the distribution company, the generator, the consumer, the fist buyer and sellers on the exchange, the member with highest registered clients etc.

Speaking about the event MD & CEO, IEX, Mr. S N Goel, MD and CEO of the company said, “This is truly a very special day for the exchange as it completes a successful decade of operations. The exchange has been transforming the power market through its pioneering efforts, competitiveness, innovation, state of the art technology, transparent price discovery, flexibility, reliability greatly enhancing the speed and efficiency of trade execution. They will continue to aspire for creating market avenues to take the power market to newer heights in the future.”

Energetica India speaks with Mr. Rajesh K Mediratta, Director (Business Development), IEX to learn more about IEX and the future plans

Energetica India: Please describe IEX's decade long journey.

Rajesh Mediratta:Indian Energy Exchange Limited (IEX) is India’s premier power trading platform launched on June 27, 2008. Recently, the company has completed a decade of business in providing an automated platform for trading of electricity for physical delivery.

It all started with, the origin of the idea that, India being a diverse country there are electricity produced at different corners, thus some regions are deficit while others surplus. If this could be traded, there will be efficiency in the overall power sector. Thus in 2003, the Electricity Act (‘EA 2003’) was sanctioned which set the stage for trading of electricity. CERC the regulatory body for the power sector in India approved the launch of IEX on August 31, 2007, followed by a final approval in June2008. Thus IEX, India’s first Power Exchange commenced operations on June 27, 2008 with the launch of the Day Ahead Market (DAM).

Within a span of ten years, IEX has come a long way from an idea on paper, in conjunction with the stakeholders who were unsure of how power exchange could operate in a country which is overall power deficit to addition of more than 6,000 participants registered and trading on the exchange located across utilities in 29 States and 5 Union Territories.

In the first year of operations, IEX traded close to 2.62 billion units which rose to 56.2 billion units for FY18 across all the products. The average daily electricity trade volume increased from around 9 MUs in 2008-09 to more than 150 MUs now. The number of daily participation on IEX now is around 1,000.

For a country like India technology-driven, innovation- led market was a must for the concept to work along with products for the efficient management of the customer’s power needs. Thus, IEX introduced various products in its Term-Ahead market such as, Intra-Day, Day-Ahead Contingency and Weekly contacts to cater to specific customer demand. It also added renewable segments like Renewable Energy Certificates (REC’s) and Energy Saving Certificates (EScerts) to be traded on exchange. As of FY 18, 22.9 billion units of REC’s and 1.3 billion units of ESCerts have been traded on the exchange.

While, IEX started operations with a vision to provide a transparent and efficient technology platform for electricity trading in the country, it also played a bigger role in shaping the sector. IEX prices discovered on the exchange have provided critical signals to the sector and policy makers of the real price of electricity in the country. With an option to sell in the open market, capacity installed by the country’s private sector increased from 20 GW in 2008 to 155 GW in 2018, thus indicating an increased inflow of private investments into the power sector due to exchange. Power exchanges also provided the signal to assess the economic impact of congestion on state utility finances, quality of supply and retail tariffs. When IEX commenced operations, instances of acute congestion in many inter-regional corridors (that constrain the flow of power) were common. The result was evident in the exchange numbers when patterns of congestion in the transmission network were widely noted through area prices. With greater thrust by planners in resolving congestion issues, inter-region transmission capacity almost tripled from 27,000 MW in 2012 to 75,000 MW by 2017. This helped India achieve its ‘one nation-one grid-one price’ objective in the last year.

Thus, the company did not just present its differentiated case to the customers, it invited a number of prominent participants to accompany it to global power exchanges to see first-hand benefits that such exchanges provided to customers, apart from its regular workshops and conferences. The result of these customer-facing initiatives is its dominated market share of 97% in the electricity segment among power exchanges in India as of FY 18.

The company finally got listing on the Indian stock exchanges, making it a publicly owned company in October, 2017.

This has been the remarkable journey of IEX in the past one decade.

Energetica India: What is the future vision of IEX considering the industry dynamics?

Rajesh Mediratta:India trades only 4% of its electricity generated through the exchange. Traded volume as a percentage of national electricity consumption increased from around 75% in Scandinavia (Nordpool) in 2010 to  91% in 2015. Similar figures for other European countries are : UK from  11% to 47%, France from  10% to 23% and Germany from 40% to 54%. There is considerable possibility of growth for power exchanges.

 Moreover, looking at the reports of this dynamic industry, the peak demand for power in India is expected to grow at a CAGR of approximately 7.3% between financial year 2017 and financial year 2022, which, in turn, is expected to increase the amount of power that can be traded through energy exchanges. Further, according to CRISIL, the short-term electricity market in India is expected to grow to 21.1% of electricity generated in India by financial year 2022, of which 43.0% is expected to be traded through power exchanges.

Additionally, there are guidelines of Ministry of Power that allow for grid connected neighboring countries like Bhutan, Nepal and Bangladesh to trade power through the Exchanges (Term Ahead Market). This is going to be another milestone for IEX to expand its reach beyond the Indian borders and facilitate cross-border trade.

There are also proposed amendments in Electricity Act, 2003 for segregation of contents and carriage business, which could enhance private sector participation in the distribution (retail supply of electricity) business. As the number of retail suppliers increase, competition could increase as well, resulting in enhanced efficiency in the retail supply business. This could enhance power procurement among retail suppliers from exchanges to address their power purchase requirements.

Moreover, there are talks of Electricity futures to strengthen the spot market. Participants on power exchanges in India lack hedging options in the form of futures and forwards, which are common in global markets. With adequate liquidity in the spot market, longer duration forward contracts and future market in electricity could enhance liquidity further and strengthen the spot market, a prospective opportunity for IEX.

Energetica India:  Please introduce readers of Energetica India to IEX Excellence Awards

Rajesh Mediratta:Instituted for the first time, IEX Awards endeavors to recognize and acknowledge  all the Members and Clients registered on the exchange who have contributed significantly in the journey over the last one decade.

IEX 10 Year Excellence Awards 2018; signifies the IEX association and achievement with its stakeholders as well as the trust and belief that is shared mutually. The awards were presented under ten (10) different categories to honour market participants namely traders, discoms, generators, REC buyers, REC sellers, Escert traders with highest volumes.  The complete list of the awardees is below.