Energy sector futures: NSE to launch electricity futures in coming weeks; fees waived for first 6 months
National Stock Exchange
(NSE) is set to launch electricity futures contracts within the next two to three weeks, offering power sector participants a tool to hedge against price volatility. The move comes after the exchange secured all necessary approvals from the Securities and Exchange Board of India (Sebi) last month.
The product is designed to serve a wide range of users, including power buyers, sellers, traders, industrial consumers and retailers and enable them to manage electricity price risks more effectively.
'We have all approvals in place...we are talking to all stakeholders. Our internal team is fully prepared...within 2-3 weeks we will announce the launch date,' said Harish K Ahuja, NSE's head of sustainability, power, carbon markets and listing.
Once launched, the contract will become operational within days. Each one-month electricity futures contract will represent 50 MWh, equivalent to 50,000 units of electricity, and will be priced using the 30-day weighted average spot price across three platforms: Indian Energy Exchange Ltd, Hindustan Power Exchange Ltd, and HPL Electric and Power Ltd.
The monthly contracts will be available year-round, starting on the first business day of each month and expiring a day before the end of that month.
Tick size has been set at Re 1 per MWh, with a maximum order size of 2,500 MWh, PTI reported.
To promote the product, NSE will waive transaction charges on electricity futures trades for the first six months following the launch, NSE chief business development officer Sriram Krishnan said.
The exchange is also exploring a Contract for Difference (CfD) model to help renewable energy projects achieve predictable revenue streams, a crucial step in India's journey toward its net-zero targets.
According to Niti Aayog, India needs over $250 billion in annual investment until 2047 to meet its decarbonisation goals. By 2030, renewable energy is expected to make up more than half of the country's installed power capacity.
A vibrant and efficient electricity derivatives market is key to drawing in the scale of climate finance India needs, both from within the country and from global investors.
As the first Indian stock exchange to set up an electricity trading platform with the launch of Power Exchange India Limited (PXIL) in 2008, NSE brings deep expertise in both spot and derivatives markets. This experience puts it in a strong position to develop a well-integrated and liquid electricity derivatives ecosystem.
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