One Grid, One Price
Context:
India's top electricity regulator, the Central Electricity Regulatory Commission (CERC), has recently issued draft regulations aimed at restructuring short-term electricity trading.
By proposing the Central Electricity Regulatory Commission (Power Market) (Second Amendment) Regulations, 2026, the regulator seeks to introduce "market coupling" — a mechanism designed to discover a single, uniform market-clearing price across the nation.
Current Power Trading Landscape:
Typically, power generators (gencos) rely on long-term Power Purchase Agreements (PPAs) to sell electricity to distribution companies (DISCOMs).
However, to manage demand fluctuations, short-term electricity trades are conducted on dedicated power exchanges.
Currently, India hosts three major power exchanges.
Each platform independently discovers its own clearing price based solely on its isolated supply and demand pools, inevitably leading to price variations across the different exchanges.
The Concept of Market Coupling:
Market coupling aims to replace this decentralized system.
It is a process that matches and aggregates bids from all active power exchanges to discover a uniform market-clearing price, effectively realizing a "one grid, one price" scenario.
Key Provisions of the Draft Regulations:
The Market Coupling Operator (MCO):
The CERC draft proposes designating the Grid Controller of India (Grid India) as the central operator responsible for this unified price discovery and the implementation of the coupling process.
Power Market Coupling Procedure (PMCP):
Grid India is mandated to formulate a detailed PMCP within six months of the notification.
This will establish standardized formats for bid submissions and outline the specific features of the price discovery algorithm.
The Trading Mechanism:
Power exchanges will collect bids from participants in a uniform format and transmit them to the MCO.
The MCO will aggregate these bids to ensure efficient price discovery based on the "maximisation of economic surplus" (the sum of buyer and seller surplus).
This unified coupling will initially apply to specific segments such as the Day-Ahead Market (DAM) and the Real-Time Market (RTM).