ValuePickr Forum

Indian Energy Exchange (IEX)

@amey153 is the author I presume.


Impact of UDAY - to improve the health of distribution companies - has not been as expected.

Hi, can anyone share light on the fixed asset, up from 7-8 crore in Fy17 to 120 crore in Fy18 (largely intangible)? See, a 120 crore cash outflow towards purchased of fixed asset too, what is it regarding? Thanks.

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I think they bought out the company and IP of the trading software which they were using. This was a very wise move.

I’m protected online with Avast Free Antivirus. Get it here — it’s free forever.

I tried doing some broad work on IEX while researching this business. So this is going to be a mixed bag post.

I found some reverse auction data on the DEEP portal website. The information on DEEP is really scant, and we have to work with what we have. The idea behind this was to answer the question that many in this forum and other blogs have been asking, how big of a regulatory disruption risk DEEP is to IEX.

DEEP Portal Link:

I transferred all these RA data to the excel below and used a weighted average method to calculate the price discovery being done on DEEP. A few caveats before you go through the data,

  1. I am not sure whether this data-set is complete.
  2. I have tried to aggregate data from 200+ excel sheet and a few PDFs, there could be human errors in the process.
  3. The weighted average was the simplest/easiest operation I could think that was the least time-consuming. The average we get is a blended figure from auctions held since 2016.
  4. I am still working on the comparison data from IEX, though I am really not sure at this juncture what to use. So this blended figure has aggregated years, months, hours of seasonality, peaks, troughs and should not be compared with any single price discovery figure from IEX.
  5. The DEEP portal data consists of 30 days, 15 days blocks while IEX has shorted timeframes.
  6. The data also consists of price discovery from the IPO method. I am not sure what this is.
  7. I have tried to maintain some chronological aspect in the data, but since the excel sheets were state-wise, and the trading volumes differ from state to state the data is mixed. I doubt anyone here will have the time to sort through the data and come out with annual price discovery figures.

DEEP Portal Data: DEEP RA Data.xlsx (423.8 KB)

The blended price discovery through a weighted average method comes out to be 4.51 from 2016 to now. The total demand during this period was 421 BUs while the allotted units or supply were 372 BUs.

During the same period IEX has done volumes of 139 BUs:


A few price discovery data points from IEX that I think will be somewhat relevant to compare with DEEP:

I thought of looking for DEEP data after I saw a few comparisons done by IEX in their Q1FY20 presentation.

I am not convinced with this comparison that they have done, firstly, in the case of Maharashtra they use Goa periphery prices to highlight actual savings when comparing to MH predicted prices the saving is much smaller.

As you will see in the DEEP portal data and even in IEX trade data, it is really tough to pick and compare any two data points. In the comparison, they use the average price of the entire FY for themselves and pick certain block-based prices for DEEP which is not fair. Another point is in today’s day and age of information tsunami, it is hard to believe that such big players will leave savings of 850 cr on the table.

A few other aspects I want to highlight and share with the forum members:

1.IEX’s market share in the ST market has reduced and if I am not mistaken this is from the same time DEEP started in 2016. What else explains this downtrend?

  1. Active participants in all industries have gone down since FY15, what explains this trend? Wasn’t open access cross-subsidy surcharges prevalent throughout this time period?

A few resources for further investigation:

  1. CERC market Monitoring Reports:
  2. CERC Regulations:

Have a query on this part-

“Here, “short-term transactions of electricity” refers to the contracts less than one year for the following trades:
(a) Electricity traded under bilateral transactions through Inter-State Trading Licensees (only inter-state trades),
(b) Electricity traded directly by the Distribution Licensees (also referred to as Distribution Companies or DISCOMs),
© Electricity traded through Power Exchanges (Indian Energy Exchange Ltd (IEX) and Power Exchange India Ltd (PXIL)), and
(d) Electricity transacted through Deviation Settlement Mechanism(DSM).”

These are the participant in the which facilitate short term transactions in electricity as per CERC. So where does DEEP fit into all this? Or does DEEP does not participate in short term transactions and its PPAs are classified as long term?

The price discovery on exchanges has gone up since 2017, any reason for this? As per the CERC report, traders are giving good competition to exchanges both in volumes and price while the DSM market has stagnated since 2010 and CERC wants that though the price in DSM is significantly lower than that of traders and exchanges.

A few charts on IEX’s Price Discovery, volumes:

The majority of volumes (demand and supply) in IEX come from DISCOMs.

Contribution of OACs to Exchange Volumes -

Misc. Fact:

Trading licensees used to charge trading margins up to 10p/KWh in 2005, after that CERC reduced their trading margins to 4p/KWh in 2006 and now allows up to 7p/KWh if the sale price exceeds 3 Rs/KWh and 4p/KWh if lower than 3 Rs.

The weighted average price of electricity bought by OA consumers at IEX was lower (3.48/kWh) when compared to the weighted average price of total electricity transacted through IEX (4.22/kWh).

The volume of electricity bought or sold on the exchanges or through traders by any entity has little effect on the price:

An entity buying higher volume during off-peak hours can have a lower weighted price than one with a lower volume during peak hours.

Congestion in the transmission network will be a key monitorable in the future of this business. Here is a chart with historical values:

Congestion has reduced significantly since the 1st half of this decade, though congestion charges are still high.

w.r.t. to RECs it is good to see that solar has come on par in terms of pricing to non-solar:

we are seeing good growth in the number of RECs traded:

though, since past few years supply far outstrips demand for RECs:

Volumes and weighted price of RECs of exchanges:

REC market is clearly not showing true price discovery as the ceiling and floor prices are regulated by CERC. This is perhaps a protectionist move to safeguard the interests of different groups involved.

The 2019s abnormal increase in solar REC volumes was due to the intervention of SC in halting trading of RECs. Non-solar RECs were allowed conditionally in 2017 while solar RECs were suspended till March 2018. When trading resumed after one year, the majority of RECs were at or near expiry for which CERC intervened by extending the validity beyond the 1095 days figure.

A new RPO compliance cell has been created by MoNRE to ensure compliance. Further growth targets have been given for future years.

We will not see 2019 figures soon, but growth in this market is being actively created.

I am still studying this business and the power sector, I am no expert and all of the above is just conjecture on my part. If you find any discrepancies please do correct my findings.

Disc.: Not Invested.


Hi Abhinav
You have done some detailed worked.

One needs to step back and first analyze the electricity “market-design”
Short-Term power = contract with duration less than 1 year.

DSM (Deviation Settlement Mechanism) is not a “market” - it is used as “balancing power”. Eg. DISCOM predicts demand will be 1000 MW tomo. It buys 1000 MW power from various sources (long-term PPA, DEEP, IEX etc.). Now, suddenly there are torrential rains tomo, demand reduces to 900 MW. What happens to the extra 100 MW?
It gets sold in DSM.
The opposite is also true. If demand for some reason is actually 1050 MW instead of 1000 MW, the extra power is supplied via the “deviation settlement mechanism” (DSM).
The DSM rate is a penalty not a market price of electricity.
Higher volumes of DSM pose a security threat to the electricity grid.
This is the reason why we observe steady decline in DSM volumes over the years since CERC discourages these volumes by charging progressively higher penalty.

DEEP portal is only for price discovery not for settlement (ie transmission allocation)
IEX = price discovery + (guarantee of) delivery.
The drawback of IEX is that one can trade power only 11 days in advance since “forward contracts” in electricity are sub-judice.
This is also the reason why prices on IEX (day-ahead) are typically lower than DEEP portals, since sellers are desperate to sell (electricity cannot be stored). DEEP portal is a few months in advance, there is still time for the seller to make a contract at a higher price than selling that electricity in the day-ahead IEX market.

DEEP portal exists because they can do longer duration contracts.Once forward contracts are allowed on exchanges, DEEP portal may become irrelevant.
DEEP portal was introduced because power trading was completely OTC (negotiated settlement) before. There was huge scope for manipulation and/or corruption. Prices discovered for procurement in Maharashtra would be very different than prices discovered for procurement in Uttar Padesh (the famous UP tax).

I have sold electricity for 4 years myself.
My suggestion is first study a little more on market-structure before putting in too much effort on analyzing the numbers and relative prices and volumes.


Hey Amey,

Seems like you have a pretty good understanding of the company and the business.

So, can you give some idea on the demand and supply side participants; like type of participants and share of volumes contributes by these participants.

And do you think that, PTC posses a risk for IEX since it contributes 25-30% of exchange’s volume and if PTC moves its volumes to another exchange probably the one being setup by BSE+PTC.


There are basically two types of buyers - distribution companies and open access consumers.

Imagine it this way. Suppose I am a buyer (industrial open access consumer). I buy on IEX. I buy 10 MW every day at average Rs 4 per kwh.
Energy Bought = 10 MW * 24 hours * 10^3 = 2,40,000 units (kwh).
Money spent every day = 2,40,000 * 4 = 9,60,000 Rs
I pay 2 paise per unit to IEX as fees
Fees to IEX = Rs 4,800 (Four Thousand Eight Hundred only)

Suppose a new exchange starts. Since from day 1, price discovery is not very efficient as not many sellers/buyers can be persuaded to shift the exchange unless some tangible benefit is guaranteed/highly likely.

So, price settles for Rs 4.20 per unit (5% variation) on the new PTC exchange.
What is the money I spent on buying power from the new exchange.
Money spent = 2,40,000 * 4.2 = 10,08,000 Rs
This is a loss of Rs 48,000 = 10 times the fees I pay to the exchange.
Even if the new exchange offers me free trading like Zerodha, will I switch from IEX to the new exchange?

Plus, as per regulations, a power exchange is a market infrastructure. This is the reason why BSE, MCX, NSE are being listed on stock exchanges - there should be no single promoter who can influence the rules of the game.
PTC can own only 5% of the new exchange

Check this out

The new exchange is not getting permission from CERC till they first sell the ownership to a wide variety of institutions.
The article also mentions that PTC will end up owning only 5% of the stake.
Will PTC for 5% of the stake risk making real and big losses to its customers who trade on the IEX?

If PTC is so interested in the power exchange business, why did they sell their stake in IEX after making something like a 100X returns?

So, lets not worry about things which are really really remote. We are not investing 50% of our portfolio in this stock. If a competitor comes and survives, the market would have sufficiently expanded for 2 exchanges to flourish. And many of the reforms I have mentioned in my article would have already taken place.


IEX is the biggest player in spot energy trading with a share of 97 per cent, and with participation of over 6,500 players

Potential threat to solar roof top targets

Q2FY20 CCT Notes Q2FY20.pdf (268.1 KB)

This one was very informative about the business segments and opportunity and is a must-read to understand the business.

Jan 1, 2020, launch date for real-time trading. The sizeable opportunity of 30-40 BU in the bilateral market which is 3-4 months contracts.

When demand is low, overdraw is minimal and hence DSM volume is less. With RE the uncertainty in availability is more. And more you overdraw you are charged 100% of DSM price. So conversion to spot will happen when real-time starts.

We are present in the LT (within the ST market) till the time the market is there. We expect it to shift to the shorter term.

Real-Time, long duration and the cross border will become a reality by FY end. The volume in these markets is bigger than what we do today. Green TAM will not be a reality this FY. In long-duration, we will have to work out the margin profile differently from where we are now. RT and CB will be similar to current.

Open Access has seen good growth this year due to good price discovery on our platform and this will bring in more liquidity and improve price discovery further. RTM will not wait for NOAR National OA Registry by POSOCO as CERC has agreed.

We have also seen a lot of traction in the weekly market as well because sometimes what happens is distribution companies when they procure power through DEEP platform under bilateral, we try to convert them to the spot market, so some distribution companies get converted directly into the spot market. Some take time and in between they want to try weekly market also because this gives them an opportunity to buy power in fixed quantum for week as a whole so once or twice, they buy there, and they start comparing their prices with the spot market and then they try to shift to the spot market also. So, we have seen traction in all the segments and overall growth.

The gas exchange market is as big as electricity. The market for gas is in fertilizer, CGD and some power producers. The situation is where electricity trading was 10-12 years back. We are leading the initiative to introduce this and this excites us.

Past growth was driven by growth in the overall electricity market and LT PPAs not being signed. We are calibrating ourself to the macro GDP picture and dealing with it. We are launching new products to increase our TAM and customer base.

Growth drivers - new products, new tenures, the shift from DSM, DEEP, 24/7 power, saubhagya, industrial growth with OA.

We welcome competition in the market as we are currently alone in trying to expand the market segments. Currently, we are at 4% in trading market and ST at 11% if it goes to 15-20 everyone will benefit.

Competition is for bilateral volumes, DSM not going to compete as we are trying to take through you.

Running of Business - Your first question was about how we guarantee, what we are doing is as you know the market is open at 10 in the morning and then the published final schedules are filed in by evening. Once the final schedules are published our job is over. Now all these regional load dispatch centres and state load dispatch centres will publish these results and the consumer is aware how much unit he has to draw from the grid. So open access consumer typically have supply from their own distribution company and parallelly they are also buying from exchange to take advantage of the lower prices. What they do is, some part they are buying from the exchange and some other part they are drawing from the grid, so the quantity that has been scheduled they will draw and they will pay to exchange and for the remaining part, they pay to the distribution company. Whatever decisions are there on account of distribution companies, they will settle it with the distribution company. So there is no risk on that front. Whatever final schedules are there they have to abide with and they have to follow that schedule. They have to meet those schedules. I think we should clarify the part as if sellers are defaulting electricity system, is a bit different from others. I do not know whether you are taking reference from gas. Here in this case if the seller is defaulting it means that he is not able to deliver, then he pays his deviation charge to the system operator, so we will connect with the state, then he handles then the system operator in the state like SLDC, settles with him the penalty for the deviation or the imbalance created by him. If he is connected to the interstate grid then the RLDC comes in, it is totally independent. In case SLDC schedules are issued to the seller is to be maintained by the seller and scheduled issued to the buyer needs to be maintained by the buyer and if the seller is defaulting there is no impact on the buyer.

OA is favourable in Gujarat, Haryana, TN, AP, Telangana and RJ. Open charges are not very high and we are seeing an increase in participation.

Medium-term PPAs auctions were floated in Mar 19, not a single PPA has been signed. Price discovered was Rs. 4.41. And everyone knows our prices. Last year volume growth was due to coal linkage problem.

Last FY Ecert was 11.5 lac. This year we expect 5 lacs in H2. The overall number is expected to be much bigger than last time but we do not know whether we will happen in Q3 or 4 or spillover to next year so we are taking only a part of it.

On CB final procedure approval is pending from CEA.

Gateway issue for RT market: It is sort of handled. The market model which they prepared about a year back when it was 100% only a paper where they were talking about the model itself they have made certain corrections so the initial model was this market would be one hour. It would be on hourly basis four-time block, so now they have reduced it to 30 minutes, which is two time block to address some of the concerns, which are related to gate closure, but the entire thing is still not covered in that, but I think the initial feelers that states are more or less okay with this and since the correction from 60 minutes to 30 minutes has been done they are sort of accepting it and we are expecting it to start very soon. Because of the Discoms concerns on the gate closure, which they said that right to recall should be very close so that part for taking care of that part only they have made it now half-hourly trading. Earlier they thought that will trade 24 times in a day and for each one hour and for every 15 minutes in one hour. Now they are reducing it to half an hour. The purpose was to take care of the concerns of the distribution company on right to recall period. Gate closure should not be a hurdle to the entire market.


Also, how do you differentiate versus DEEP because I was just thinking DEEP gives the Discoms an option that you can pay after say 60 days or 30 days, but in your case, they will have to pay upfront, so why would a Discom want to shift to you?

We have various contracts in fact. One would be like DEEP also. We are thinking and we are also working on contracts, which are like our weekly contracts, so these are more standard contracts where you can have high participation coming from both buyer side and sell-side. I will give you one example. Suppose you are aware that there is a contract available for procurement of power for the month of December and it is going to close on this particular day so you will have participation coming from various sellers as well as various generators as well as various distribution companies. This is not happening on the platform. It is more of an RF through the sort of a thing where one distribution company is placing their bid and then multiple generators are coming and the price is being discovered and the reverse option is done and then these are executed. So ours would be more of a standardized contract and standardized product similar to what we have in our weekly market and globally also if you see it is like this only. More standardized and more liquidity. This is how it happens. Now your second question was whether the settlement would be done on a monthly basis, no. In our case, it would be done on a daily basis. We will take an advance, but that would be one day in advance. We will not ask them to make payment for 30 days in advance. They will make payments for the only day in advance and on a daily basis settlement will be done and then the value would be because there will be no financing cost. There will be no risk because today you have seen that various distribution companies when they come to DEEP the price discovered for all these distribution companies are very different, where their creditworthiness is not good they get very high prices. Some other distribution companies like Gujarat they get low prices. When you are coming to exchange you are treated at par because the entire risk is being absorbed by exchange, so the exchange is taking responsibility of paying to the seller and then the value would be reflected in the lower price that will be discovered at the exchange.

For instance, there is an overanxious customer and he pays some additional charges because of these additional surcharges and infrastructure and other things and so says for example gone for a long-term contract I mean less than one year contract and there is a change in the regulation so who bears that risk? Is it on the customer itself or that is on you for sure?

Not really. What happens is in all those contracts the price discovered is at regional beneficiary and we are responsible for that price only. All those charges are to be borne by respective whether it is generator or Discom their side of charges will be borne by themselves.

Uploading all previous CCTs in one place:

Q1FY19.pdf (277.5 KB) Q1FY20.pdf (366.7 KB) Q2FY18.PDF (289.9 KB) Q2FY19.pdf (331.3 KB) Q2FY20.pdf (268.1 KB) Q3FY18.pdf (286.9 KB) Q3FY19.pdf (344.1 KB) Q4FY18.pdf (313.7 KB) Q4FY19.pdf (355.8 KB)


Potential disruption rising in the horizon. Currently only limited to P2P renewables.

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Please correct me if I am but isn’t Blockchain a new method for settlements? Why cant an exchange use Blockchain?

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Well they certainly can. Blockchain is a distributed trust system, while visa, mastercard, exchanges, banks, money transfer are centralized trust system. They are just different ways of enabling the same function. Have thought of the same question that you asked about NSE, BSE & MCX. Exchanges are highly regulated businesses, I think it would require a proof of concept and approval from the regulator to change the settlement mechanisms. While privates can adopt new technologies and deploy it in niches operations. In case of exchanges the threats is difficult to determine as it can be real in terms of technology disruption and could be illusory due to regulatory protection.

But the threat of disruption to current business is very real if the regulator sides with the disruptor. Take the case of NSE adopting digitization before BSE. The results were disastrous for BSE, a newcomer just uprooted them.

Another pathway is that incumbents can acquire the technology if they find it difficult to deploy it organically. Something like car manufacturers will not be disrupted from electric vehicles.

Given all the forking future possibilities thats why I said potential disruption ahead that should be watched.


They are notoriously slow for huge data. Generally any technology can disrupt incumbent in ideal conditions. But from practical utlity and ease there needs to be lot of commitment and condusive environment

Investor presentation08f65ae6-ef95-41ea-9ff5-ddb01fd82a87(3).pdf (2.7 MB)

renewable energy trading …

"Recently, the Assam government had asked the Centre to pay ₹1,000 crore to NTPC to help it get out of a deal to buy power from the 750 MW thermal power plant in Bongaigaon. This is because power exchanges, with their one-day and up to 11-day contracts, have allowed utilities to lower the cost of power procurement.

The price at which electricity can be bought at exchanges has gone down to ₹3 KWh, which is lower than the rates under many long-term PPAs signed with power producers. This move to link all the regional power grids with a single national grid has allowed surplus power from one region to flow to other regions where demand is higher. It also gives reliable data on the electricity rates at which a State power utility can buy from exchanges.

Now that there is surplus power being generated in the country, and with the rise of cheaper renewable energy over the years, State utilities have realised that they are now stuck with expensive PPAs. They are using every chance they get to buy power from exchanges."


hi All. This thread has some incredible posts.

Adding my observations here -

I have been grappling with this one question - Does IEX have a sustainable competitive advantage?

We can clearly establish that the economies of scale are inherent in the business since marginal cost of revenues is near zero. However, does this business qualify for network effects? Both sides of the network, the buyers and the sellers, grapple with pricing issues – private buyers are restricted due to high open access charges, with the buyer pool limited to 55 discoms when the price of electricity shoots up. Sellers, on the other hand, are the distressed generators who have not yet been able to get a PPA for the electricity and are selling power at marginal cost (eg. The breakeven point rate for coal generators is INR 5 per Unit, much higher than the price discovered on the exchange). So long as this strenuous conditions do not go away, network effects, where both user networks benefit, do not seem to emerge.

The grey bar, which is the volumes cleared on exchange has been steadily increasing as a % of potential bids which indicates improving price discovery on the exchange.

Will IEX, in the current dynamic, remain in my high quality universe? It’s a difficult question, but for now, I would go with Yes. Any reforms in power transmission and distribution are bound to help IEX increase its volumes and the short term market is here to stay, with more contribution from renewables and lower number of PPAs. In short term market too, IEX is poised to be the best platform since it’s the only one that offers counter party guarantee and also collects money upfront, in a sector wracked by bankruptcies and trust deficit. With regulations a major risk to the company (CTT almost broke MCX’s back), the margin of safety I can count on is buy the business at its steady state value.

I have made detailed write up covering the sector and the company here -

Do let know of your views, if any.


I don’t think top 10 sellers on IEX in day ahead market (which is biggest segment of IEX as per current) are distressed generators. These seem to me state generators, which are using IEX to sell extra electricity. In one of the recent investor presentation, IEX had put a case study of how Punjab is using IEX to manage its varying electricity demand and saving money.
Top 10 sellers and buyers on IEX:

Contribution from top 10 sellers: 40%.
Contribution from top 10 buyers: 60%

Refer CERC annual report on short term power market for more data.