Developing Power Market Derivatives for the Indian Power Sector

IIT Kanpur, in collaboration with Center for Energy Regulation (CER) and Energy Analytics Lab, organised a Stakeholder Consultation Workshop on ‘Developing Power Market Derivatives for the Indian Power Sector’ on March 1, 2023.

The discussions highlighted the pivotal role of derivatives in power market development and the need to enhance understanding among key stakeholders, particularly distribution companies. These entities could leverage such instruments to effectively hedge their exposure to short-term power market volatility, ensuring greater stability and risk mitigation. The workshop concluded with a consensus on the potential of power derivatives to enhance market efficiency and manage risks in the Indian power sector. The event featured two insightful panel discussions and deliberations among esteemed industry professionals.

The first panel, comprising representatives from the Central Electricity Authority PTC India Ltd, Indian Energy Exchange, and EY Parthenon, explored the theme “Identifying Risks and Hedging Avenues in the Indian Power Market: Role of Derivatives”.

Siddharth Arora, Associate Director, Clean Power, Shakti, said at the panel discussion, “Derivatives play a pivotal role in hedging against price volatility, enabling market participants to mitigate risks associated with fluctuations in electricity prices. As the energy landscape evolves, embracing derivatives not only enhances market liquidity but also creates innovation and competitiveness. Its time now to normalisation of terms such as Forwards, Futures, Options, Call, into the lexicon of the Indian power markets.”

The second panel delved into the “Regulatory Framework for Power Market Derivatives” with Professor Singh setting the stage through a presentation. Eminent panellists from the Punjab State Electricity Regulatory Commission, Central Electricity Regulatory Commission, Grid India, Securities and Exchange Board of India, and The Lantau Group offered valuable insights and perspectives on this critical aspect.