India's Second Online Power Trading Platform Goes Live

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Researched by Industrial Info Resources (Sugar Land, Texas)--Power Exchange India Limited (PXIL) (Mumbai), India's second power exchange, started operation on November 10, 2008. The operation of the electronic, online exchange was inaugurated by the Minister of Power, Sushil Kumar Shinde. PXIL, a joint venture between National Stock Exchange (NSE) (Mumbai) and National Commodity and Derivatives Exchange (NCDEX) (Mumbai) also has equity partnership from Jindal Power (BOM:532286) (Noida), Power Finance Corporation (BOM:532810) (New Delhi), JSW Energy Limited (Mumbai),Gujarat Urja Vikas Nigam Limited (Vadodara) and GMR Energy Limited (Bangalore, India). NSEiT (Mumbai), a fully owned subsidiary of NSE is the technology partner for this venture. PXIL which aims to work as an interface between the buyers and sellers in the power sector received bids for 6300 megawatts (MW) on the opening day. Mr. Shinde hoped that the transparency of the system and operations would attract additional investments in the power sector. PXIL would initially operate as a Day-Ahead Market system. Based on closed auction, it will provide double-side bidding and clearing at uniform price. Other options and products will be added later.

India witnessed the launch of its first online power exchange platform-- India Energy Exchange (IEX) (New Delhi) on June 27, 2008. IEX is a collaborative effort of PTC India Limited (BOM:532524) (New Delhi) and Financial Technologies India Limited (BOM:526881) (Mumbai). IDFC (BOM:532659) (Chennai, India), Reliance Infrastructure Limited (BOM:500390) (Mumbai), Rural Electrification Corporation (NSE:RECLTD) (New Delhi),Tata Power (BOM:500400) (Mumbai), Lanco Infratech Limited (BOM:532778) (Hyderabad) and Adani Enterprises (BOM:512599) (Ahmedabad, Gujarat) are the key stakeholders. Financial Technologies India Limited partnered with OMX Technology AB (Stockholm, Sweden) to provide technology support for this venture. On August 31, IEX received approval from the Central Electricity Regulatory Commission (New Delhi). IEX aimed at bridging the power demand supply gap in India but could not garner large volume trade because of prevailing power shortages. The trading through IEX has been less than 0.5% of the total power generated in the country. The total volume of power traded through IEX until November 5, 2008, was 1 billion units at $156.6 million. The highest per day volume traded was 21 million units on November 1, 2008, at $2.7 million. To encourage smaller players to actively participate on IEX, the trading limit was decreased from 10 MW to 1 MW.

India plans to add an additional capacity of 78,577 MW by 2012, a 50% increase over current capacity. Trading through power exchanges is presently low. But with increasing power generation capacity, trading through exchanges is expected to increase by 30 to 40 times in the next three to five years. Globally, large demands in power markets are tied down to long-term contracts. Demand variation -- either daily or seasonal -- is fulfilled through short-term or DAM. In such a scenario, exchanges like PXIL and IEX will play a pivotal role in providing an efficient, transparent system to match power surpluses of sellers with seasonal requirements of buyers. A third online exchange planned by NTPC Limited (BOM:532555) (New Delhi), NHPC Limited (Faridabad, India) and Tata Consultancy Services (BOM:532540) (Mumbai) has raised concerns that that too many platforms will dilute transactions in an already low-volume market.

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