A new era of transformation for the Indian energy ecosystem

“The shift in the energy mix with renewable occupying a much more prominent position also underpins the inevitable shift from the present-day policy and regulatory framework to a market-oriented framework.”
Rohit Bajaj, Head and Senior Vice President – Business Development, Indian Energy Exchange Limited (IEX)

Rohit Bajaj, Head and Senior Vice President – Business Development, Indian Energy Exchange Limited (IEX) speaks to Caroline Chorattil of EPR Magazine about the initiatives the exchange is taking to transform and strengthen the Indian energy ecosystem and how it is adding new market segments on its platform to deepen the power market.

IEX has huge potential in the short-term power market. What are you doing to attract and sustain short-term buyers?
We commenced operations in the year 2008 and today our ecosystem has over 6,500 participants, including over 55 distribution companies, over 500 generators, and more than 4,500 commercial and industrial consumers located across 27 states and in UTs. The exchange presently contributes 40 per cent of trade in the short-term power market and our volumes have grown at a CAGR of 15 per cent over the last three years. In the last 12 years, IEX has established itself as the most competitive, compelling, transparent and reliable option for the distribution companies and open access consumers to meet their power demands in the most optimum way. This benefit is clubbed with the best-in-class customer experience for all stakeholders with state-of-the-art technology.

The vision of “Power for All on 24×7 basis” will ensure growth in demand for electricity as well as sizeable increase in the per capita consumption. Our expertise lies in expanding the short-term market as well as the exchange market along with the advancement on the technology front with initiatives to transform the Indian energy ecosystem. Our growth strategy is two-pronged, first being strengthening our product offering. This implies introduction of new products — Long Duration Contracts (LDC) to enable market participants to buy supply for up to 365 days, Cross-Border Trade (CBT) with South Asian countries such as Nepal, Bangladesh, and Bhutan to begin with, Real Time Markets (RTM) contracts which will enable buyers to bid for electricity demand as close as 1 hour before delivery, and the Green-Term Ahead Market (GTAM) which targets renewable energy and is also on the horizon. The second is expanding the short-term power market and moving beyond the current 12 percent, thus enabling greater penetration of market framework and competition. The market framework has the potential to transform the sector from the vicious cycle of financial and operational inefficiencies to the highest level of competition, transparency, and efficiency.

What steps do you plan to take to improve the platform and stabilise its market position?
Our core offering will always continue to be energy markets coupled with the second dimension, which is technology, and that will remain our focus in 2020 and beyond.

In line with the needs of the market participants as well as market development, we plan to diversify our offerings horizontally into other areas in the energy sector. We will be leveraging our key strength of delivery-linked tradeable power contracts and are entering the gas market with Indian Gas Exchange (IGX). To deepen the power market, we will be introducing several new and additional market segments on our platform which will support the overall growth of the power and energy sector, besides creating opportunities for renewable energy trade.

The technology dimension also opens many interesting opportunities. We are working on applications to facilitate smart power procurement, analytics, and blockchain, leveraging our ecosystem as well as the market data.

What are the current trends driving the rise and fall of prices on the exchange?
In FY20 (April 2019 to December 2019), the average price on IEX was Rs 4.08 per unit and reduced to 24 percent over a price of Rs 3.09 in the same period in the previous fiscal. The price on the exchange reflects the dynamism on the demand-supply side. With adequate availability of domestic coal, subdued imported coal prices and lower than expected demand, this fiscal year, the prices in the day ahead market on IEX have been much lower compared to the previous year and this trend is likely to continue. With 40 percent of trade in the short-term power market at IEX, our prices are a benchmark for the power industry for all long-term and short-term contracts.

What is your outlook for the power sector in 2020?
Electricity is the basic enabler of life! As a nation, we are bound to see a much faster growth in the demand for electricity in the decade ahead. To ensure “Power for All on 24×7 basis”, at IEX, we envision power and exchange markers to play a key transformative role towards accomplishing our aspirations and goals. The shift in the energy mix with renewable occupying a much more prominent position also underpins the inevitable shift from the present-day policy and regulatory framework to a market-oriented framework.