Last updated on October 3rd, 2024 at 10:34 am
Reading Time: 3 minutesIEX:In Tuesday’s intraday trading, shares of Indian Energy Exchange (IEX) fell 12% to Rs 209.40 on the BSE as a result of widespread media reports that the government intends to introduce market coupling for power exchanges.
From its 52-week high level of Rs 244.35 that it touched during intraday trading today, the stock fell 14%. With a total of 110.74 million equity shares trading hands on the NSE and BSE, or 12% of IEX’s total equity, the average trading volumes on the counter increased by more than six times.
From the stock’s June low of Rs 134.30, it has recovered 82% of its value. On October 19, 2021, it had reached a record high of Rs 318.71.
According to ET NOW, which cited people familiar with the development, the power ministry has asked the Grid Controller of India (Grid-India) to make sure that the pilot study for coupling power exchanges is finished by the deadline.
In the coupling model, all national power exchanges’ buy and sell bids are combined and matched to determine a standard market clearing price (MCP).
In terms of design changes, market coupling is one of the major regulatory factors that directly affects the exchange, according to IEX’s FY24 annual report.
The Central Electricity Regulatory Commission (CERC) published the Power Market Regulations, 2021 (PMR 2021), which contain the enabling provisions for market coupling. Nonetheless, the PMR 2021 states that this clause will take effect as soon as the commission makes a decision.
The company had stated that the CERC has not yet made a decision regarding the regulatory process’s implementation of market coupling.
CERC is investigating the potential benefits of integrating Real-Time Market (RTM) data with Security Constrained Economic Dispatch (SCED), a system run by Grid India, based on feedback from stakeholders.
In its order dated February 6, 2024, CERC mandated that Grid India develop software for the shadow pilot study within two months of receiving the order, and then conduct simulation for the following four months.
The sale of unrequisitioned power (URS) on the exchanges in the day-ahead market (DAM) and RTM is required by the most recent amendment to the Late Payment Surcharge Rules 2022.
The requirement to sell URS power in DAM and RTM will result in the best possible capacity utilisation; additional optimisation through the coupling of SCED and RTM may not yield appreciable benefits. Consequently, according to IEX’s FY24 annual report, it is anticipated that the shadow pilot being carried out by Grid-India will not result in any notable gains.
“We don’t think market coupling is beneficial. We do think that even with a tiny gain, there will be a lot of work involved in implementing it, so Market Coupling won’t be practical,” IEX stated.
In its power utilities report, Motilal Oswal Financial Services (MOFSL) noted that increasing power consumption, expanding power infrastructure, new product introductions like long-term contracts, and an increase in Firm and Dispatchable RE (FDRE) projects all naturally benefit IEX.
The broking firm projects that IEX’s volumes and PAT will grow at a compound annual growth rate (CAGR) of 17%/15% between FY24 and FY27 due to declining power prices, a strong market share, and a favourable base effect.
According to analysts, the introduction of long-dated contracts may increase volumes by 4% in the first year.
However, given IEX’s dominant market share, the potential implementation of market coupling is a significant regulatory overhang that could limit its growth prospects, according to MOFSL.
