NSE to Launch Electricity Futures to Hedge Price Volatility in Power Market
The contracts are expected to strengthen the financial sustainability of India’s renewable energy producers.
June 26, 2025. By Abha Rustagi
At a press meet in Delhi, Sriram Krishnan, Chief Business Development Officer at NSE, announced that the official launch date would be revealed in two to three weeks. The monthly base-load futures contracts will be listed for up to 12 months and activated on the first business day of each month.
“These contracts will offer real cost protection for discoms and predictable revenues for power producers,” said Harish K. Ahuja, Head of Sustainability and Power Markets at NSE. He shared a use case where a discom could have saved INR 500/MWh in July 2023 had it hedged using futures.
The contracts are also expected to strengthen the financial sustainability of India’s renewable energy producers. Minimum capacity thresholds for renewable energy participants have been clearly outlined - 347 kW for solar and 198 kW for wind generators, enabling even mid-sized renewable players to participate. With predictable cash flows enabled by futures trading, renewable Independent Power Producers (IPPs) can better manage risks and attract institutional capital.
The move aligns with India’s aim to meet its net-zero goals while addressing rising electricity demand, projected to reach 1,900 billion units in 2025. Ahuja emphasised that the contracts can help integrate more renewables into the grid by offering price certainty, which is critical for scaling intermittent sources like solar and wind.
NSE Clearing Ltd, the country’s largest clearing corporation, will oversee the settlement process. Final prices will be based on the volume-weighted average price (VWAP) of the Day-Ahead Market (DAM) traded on Power Exchange India Ltd (PXIL), which NSE helped establish in 2008.
Globally, electricity derivatives have proven instrumental in stabilising wholesale markets. In the US, monthly power contracts reduced spot market volatility by 50 percent, while in Europe, derivatives trading dominates wholesale electricity transactions.
According to the NSE, entities with as little as 70 kW of demand, such as malls, hotels, and even large residential complexes, could participate in futures trading. This opens the door for ultra HNIs and corporates to hedge electricity expenses. Enhanced demand elasticity and deeper retail participation are expected to improve market liquidity and aid efficient price discovery.
Future plans include quarterly, annual, and Contract-for-Difference (CfD) products, potentially expanding the market’s size. With India ranking as the third-largest electricity producer globally, the electricity derivatives market could scale to 3,000–8,000 BU, if global benchmarks are applied.
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