Hi Amnesiac,
Any idea how much is the commission today? As far as I know, the current commission is 2 paise per unit of electricity traded. I may be completely wrong. But if it is around this value, is it not already too low? Can it reduce further?
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Yes it is 2 paisa, charged from both buyer and seller each for every unit of power. This can come further as the power prices come down further. I dont think its too low.
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In an interview earlier today, as broadcasted on CNBC Awaaz, power minister R K Singh mentioned that power shall be supplied to the whole country at the same rate and decision shall soon be made on market coupling.
Requesting members to share insights on this comment from the minister. There was news few weeks ago about discarding market coupling altogether. Is there a U-turn by the government? In plain and simple terms, essentially, what the honorable minister is saying, is that every GenCo shall be forced to produce power at a fixed rate and every distributor shall be forced to transmit power at the same rate to anywhere in the country. How is that ever going to be possible? I am not sure how a single price mechanism can ever be implemented in such a big and diverse country like India. The costs for producing and transmitting power in different parts of the country would be different, based on the raw material, logistics and other expenses. Also, any power producer, say one offering power at lowest cost, would still have limited capacity. This lowest cost producer of electricity can no where come close to meeting the demand of a certain region, forget the entire country. So, as long as demand exceeds the lowest cost supply, customers would be forced to revert to higher cost producers.
What am I missing!?
Or does this comment indicate willingness towards MBED? Meaning, MBED would ensure a common mechanism for best price discovery across country all the time. Because with MBED, all the power produced in the country will pass through a price discovery mechanism, which may be what the minister was indicating. If that’s what he meant, with or without market coupling, isn’t this a positive for IEX? But if so, why the big fall today!?
Any insights from esteemed members of the group are highly appreciated.
The Stock has developed a market coupling phobia! The moment that word is mentioned, it gets the bears activated 
The key assumption is that with 95% of volumes being done at IEX, its ability to discover the best price will keep the volumes coming at this very exchange!
The management and market participants feel (as seen in response to the white paper) that the government is focusing on the wrong issue! The key issue is that 95% of volumes don’t happen in any of the exchanges…but happen offline through PPAs. So something needs to be done from the regulatory point of view to first get everybody to the market.
The Government on the other hand feels that the Market coupling mechanism will make the PPAs irrelevant and hence we must have that first in place.
I don’t think the market understands the IEX promoter’s ability to spot an opportunity ahead of the pack ( IGX, Carbon Credit Exchange & Recycling being the latest) so IEX’s ability to capitalize on emerging opportunities remains unchallenged…market coupling or no market coupling!
#biased
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Video in question https://www.youtube.com/watch?v=Ve0wqmXdFss&ab_channel=ZeeBusiness
Question-> What is happening about market coupling?
Ans-> Market coupling will happen. There was a consultation recently about it.
Question-> Timeline?
Ans-> We can’t say anything about the timeline, let us look into the result of the consultation first.
#Invested
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If Market Coupling can solve all the problems then Why it is not yet implemented? People should have asked this question to the Authorities.
It seems that, decisions are sometimes taken on half cooked data which creates panic among few shares. Focus should have been on making the power available to common man at affordable prices and price discovery could happen at any place. Why authorities are worried about where this discovery happens. It seems that some wasted interests could be there which has created this unnecessary situation from time to time.
Disclosure : Closed my position few weeks back due to this inappropriate way of looking at power management and pricing matter. Though I have closed my position, I believe that IEX might able to overcome this noise but I thought of playing it safe.
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I watched that interview, when the minister says one price I think he is talking about one price across all exchanges, that’s what market coupling will do.
Also, there is a chance that the consultation that he is referring to is the consultation that the CERC did with all the stakeholders, may be he is not aware of the outcome.
HPX will lobby hard, but seems like CERC has the best interest of all the stakeholders of the ecosystem. Nevertheless, owning a scrip like IEX is like the sword of Damocles hanging above your head, I am mitigating the risk by keeping the sizing small.
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Hi, I’m just sharing this very interesting data. Look at the number of investors in IEX. The growth in the number of retail investors is simply mind-blowing.
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It means strong hands FIIs are selling and Retail investors are buying.
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Can anybody explain why the stock price corrected so much?
I thought the results were good for Q3 Fy 23-24 with Dec EPS = 1.0 (+ 27% from last Dec) and Sep EPS = 0.93. and ROE = 39.4
Due to the news of market coupling.
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Interesting development. IEX keeps coming up with new innovations.
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As soon as there is any good development in IEX, CERC drops some bomb
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The pros and cons of it are secondary, given that IEX has 95% of the market most of the price discovery would have in any case happened on IEX, as of now it is not clear what logic will be used but we are investors not policy makers.
What is clear is that if this is done IEX would lose its pole position as market maker and would become a market taker of sorts. As price would be the same i would also render it vulnerable to price competition from other exchanges and kills the main competitive advantage , namely of pretty much being a monopoly player.
Volumes would continue to increase in power trading and it may even command a majority of the same but the logic of being a business with a huge moat is totally lost if this is implemented, as is the premium multiple it would have commanded, essentially it may become a commodity business and the brilliant return ratios it currently has may or may not sustain.
Disclosure - had a large position, sold when the news came out.
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In a February 6 notice, CERC said that Grid India will develop the necessary software over the next two months to run a shadow pilot for market coupling of the three power exchanges - Indian Electricity Exchange (IEX), Power Exchange of India (PXIL) and Hindustan Power Exchange (HPX). After the pilot, the exchanges will share data and information with the CERC to decide on the benefits of coupling.
However, the CERC made it clear that results of the shadow pilot run shall not have any effect on the price and volume discovery in the actual real time market (RTM) and day ahead market (DAM) of the power exchanges. It also stated that the trial run will not impact the final schedule and settlement for any entity during the trial period.
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The main point regarding Market coupling in the Circular
- The Commission received an overwhelming response on the Staff Paper, with
a total of 127 stakeholders submitting their comments and suggestions. The list of
stakeholders is available on the Commission’s website.- The Commission has examined the comments and suggestions received on
the staff paper. The Commission notes that stakeholders have provided a mixed
view on most of the issues raised in the staff paper. Those in favour of market
coupling have advocated its benefits mainly in terms of improved competition,
increased volumes, lower transaction costs, ease of operation, better services, check
on monopoly, better transmission corridor allocation, integration of cross-border
power markets, and that it will pave the way for reforms, like MBED, SCUC, and the
introduction of financial derivatives. On the other hand, the stakeholders arguing
against market coupling pointed out the disruption that may be caused by market
coupling, the role of power exchanges getting diminished as a bid collecting agency,
the dampening effect on innovation & technology investments, the adverse effect on
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competition, no improvement in transmission infrastructure utilization, the addition of
another layer in the form of Market Coupling Operator (MCO) and the resultant
increase in transaction costs, adverse impact on smaller traders’ businesses,
violation of power exchange licence conditions, etc. Besides, some of the
stakeholders, like PXIL and the World Bank, shared the results of the simulations
done to support the need for market coupling under the prevailing market conditions.- After carefully examining the suggestions received from the stakeholders, the
Commission felt the need for more evidence-based results to decide on the potential
benefits that coupling may accrue to the market participants and the power system
as a whole. Accordingly, the staff of the Commission carried out several simulations
using bid data from power exchanges to study the impact of market coupling on
volume, prices, and economic surplus, as stipulated in PMR 2021. For the purpose
of the analysis, bid data from IEX and PXIL for the Real-Time Market (RTM) for 40
days in 2022-23 was considered where bids, including cleared and uncleared bids,
were available on both trading platforms. The analysis for the Day-Ahead Market
(DAM) pertains to the months of January, February, and March 2023. A brief
summary of the results is as under:
i. The coupling of power exchanges enables the clearing of some uncleared buy
and sell offers. For example, in RTM, there were times when supply and/or
demand bids were received on one exchange but could not be cleared. When
the bids of the two exchanges were coupled, the cheaper sell offers on the
said exchange were cleared and replaced the high-price sell offers of the
other exchange. Additionally, some high value buy offers were also cleared
after coupling. This led to an increase in the economic surplus.
ii. In the instances where coupled MCP was below the uncoupled MCP on the
dominant power exchange, the overall consumer surplus increased. The
maximum increase in volume in RTM was approximately 250 MW. In most
instances, the economic surplus increased by less than 1% in RTM.
iii. In DAM, the coupling of power exchanges led to an increase in economic
surplus by less than 0.013%. However, in certain time blocks, an increase of
up to 3% was also observed. The maximum increase in volume was
approximately 230 MW (3% of that time block), and the maximum decrease in
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volume was 100 MW (2% of that time block). The total increase in volume for
the months of January, February, and March 2023 was ~9 MUs (0.08%
increase). The average MCP also increased by 0.3 paisa/kWh (0.06%), and
volatility was reduced by 0.050 paisa/kWh (0.02%). The number of times the
MCP touched the price cap was observed to remain the same over the
analysis horizon.- Based on the results of simulations for coupling in DAM and RTM, it emerges
that there is a possibility of uncleared bids (buy and sell) getting cleared in a coupled
scenario. However, the overall gains in terms of increase in volume and economic
surplus may not be significant. The peak time blocks witnessed an increase in
economic surplus in a coupled scenario, but over a longer time horizon, the gains
remained insignificant. Further, the impact on MCP and volatility varies across
different time durations depending on the elasticity of demand and supply curves.
The Commission finds these results broadly in conformity with the largely accepted
view that under the prevailing market structure, where one dominant power
exchange holds about 99% market share in DAM and RTM, merely coupling bids of
all the power exchanges will not yield substantial improvement in market outcome.- Notwithstanding the results of the simulations, the exercise undertaken, and
the comments of the stakeholders revealed some insights that the Commission felt
were worth taking forward. The insights were in the form of - the need to increase the
depth of the market, the scope for further optimization of system cost, and the need
to enhance power system reliability and flexibility through appropriate market design.
The Commission feels it imperative to bring in more participation in the market,
which would not only improve supply availability and encourage competition amongst
suppliers but also facilitate a platform for optimizing the resources. While the
coupling of bids in the present market structure marginally contributes towards this,
other alternatives need to be explored in pursuit of increasing market depth, system
and cost optimization and grid reliability.- The current power market is visibly a demand-driven market, as we have
witnessed in the recent past. Thus, to increase the depth, commensurate supply has
to be necessarily brought in to fully utilize the efficiency gains of the market platform.
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Resource adequacy framework is being evolved to ensure the adequacy of supply to
meet demand in all time horizons reliably and at the least cost. But this will take time,
and as such, the Commission feels it is expedient to explore all options to optimally
utilize the existing capacity. Currently, most of the generation is tied up in long-term
purchase agreements. While the efforts to bring these contracts to the market are
underway through various policy and regulatory measures – for instance, by
requiring the generators to bid their un-requisitioned surplus (URS) into the market,
defining transmission allocation principles accordingly - there still remains last mile
scope for optimization after all trading options for a specific time block/duration have
been exhausted
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Hi Sajal,
Thanks for sharing this. This document seems to suggest that the question of market coupling seems to be shelved for now. Is that truly what is means? I am bit confused since this document tells the simulations and tests are already done whereas there was this news couple of days ago about doing simulations for 4 months. Aren’t these 2 conflicting?
Can you please share the link of this document?
Thanks!
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