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Market Coupling

Facts for Prelims (FFP)

Source: HBL

Context: The Central Electricity Regulatory Commission (CERC) has released a staff paper on implementing market coupling in India’s power sector.

What is Market coupling?

Market coupling is a process in the energy sector where bids from various power exchanges are matched to determine a uniform market clearing price for electricity trading.

  • It aims to optimize transmission infrastructure use, maximize economic surplus, and create simultaneous benefits for both buyers and sellers.
  • This process helps in efficient price discovery and integration of different electricity markets or geographies, promoting transparency and competition in the energy trading sector.

 

The CERC (Central Electricity Regulatory Commission) has introduced provisions for market coupling among power exchanges in the country under its CERC Power Market Regulations (PRC) 2021. However, these provisions are yet to be officially implemented.

The benefits of market coupling include:

  • Optimal utilization of transmission infrastructure.
  • Maximization of economic surplus by considering all bid types leads to the creation of simultaneous benefits for both buyers and sellers.

 India has three power exchanges:

  • Indian Energy Exchange (IEX): 90% market share
  • Power Exchange of India (PXIL)
  • Hindustan Power Exchange (HPX)