How a Power Exchange Works: Inside India’s Electricity Marketplace

A power exchange is a technology-driven marketplace where buyers and sellers trade electricity in a transparent, standardized, and regulated manner. It uses automated platforms to match bids for electricity and ensures efficient price discovery, robust risk management, and reliable delivery.

How a Power Exchange Works

• Platform & Participants: Registered members like distribution companies (DISCOMs), generators, traders, and large consumers access the power exchange electronically. Each participant enters buy or sell bids, commonly through secure internet portals or direct terminals.

• Products & Contracts: Power exchanges offer standardized contracts: Day-Ahead, Real-Time, Term-Ahead, and green energy products. These contracts specify the quantity, duration, and timing for delivery.

• Bidding & Price Discovery:

  • In collective auctions, participants submit their bids in a closed, anonymous environment for specific time slots.

  • The exchange uses sophisticated algorithms to match buy and sell bids, clearing the market at a uniform price for each time block.

  • For continuous markets (real-time or intraday), trades are matched instantly based on price-time priority.

• Risk Management & Settlement:

  • Power exchanges eliminate counterparty risk members trade with the exchange, not directly with other parties.

  • Financial settlement and physical delivery scheduling are automated and regulated, ensuring reliability and payment security.

• Regulation & Oversight: Operations are subject to regulation by the Central Electricity Regulatory Commission (CERC), which sets trading rules, product structures, and market conduct standards.

Key Features and Benefits

• Nationwide Voluntary Access: Any eligible participant across the country can join and trade.

• Transparency & Efficiency: Real-time price publication and uniform contracts result in fair and market-driven outcomes.

• Flexibility: Participants can trade multiple contract types, including renewable certificates, via secure electronic platforms.

• Security & Reliability: Automated risk management and exchange-based clearing minimize defaults and ensure delivery.

India's leading power exchanges like IEX and PXIL have shaped market efficiency, boosted competition, promoted renewable energy, and given consumers greater control over their electricity sourcing and costs.How a Power Exchange Works: Inside India’s Electricity Marketplace