Power Exchange

Picture a stock exchange, except instead of shares, buyers and sellers are trading blocks of electricity for delivery anywhere from the next fifteen minutes to a few months ahead. A power exchange is exactly that, a regulated trading platform where generators with spare capacity and buyers needing extra power meet to transact at a price discovered fresh, continuously.

India's power exchanges, primarily the Indian Energy Exchange and the Power Exchange India Limited, allow DISCOMs, large industrial consumers and generators to trade electricity outside the traditional long term PPA structure, using instruments ranging from same day spot contracts to term ahead contracts running several months. Merchant power, the electricity sold without a long term PPA, is almost entirely transacted through these exchanges.

Volumes and prices on the power exchange are watched closely as a real time pulse on how tight the national power supply and demand balance is on any given day, and a sharp spike in exchange prices is usually the first visible sign of genuine stress somewhere on the grid.