After receiving approval from Sebi, the National Stock Exchange (NSE) is expected to launch a cash-settled monthly electricity futures contract in a few weeks.

This product enables power importers, sellers, traders, industries, and retailers to manage price risks.

Even though this product was approved by Sebi two weeks ago, MCX only intends to market it later this year.

“There is discussion with Sebi to launch annual contracts,” said Harish K Ahuja, head of sustainability, power, carbon markets and listing at NSE. Sriram Krishnan, CBDO at the exchange, said there is a huge pipeline of new products awaiting the Sebi clearance.

The monthly power contracts will have a maximum order size of 2,500 MWh, a trading unit of 50 MWh, and a tick size of Rs 1 per MWh. The NSE is also looking into contract for difference (CfD), which makes it possible for renewable projects to generate consistent income.

“The product also opens doors to banks, insurers and project financiers to enter the electricity market,” the NSE said".

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"The ELECMBL contracts will be available for 12 months a year, listed for current month and the next three months".

The 30-day weighted average spot price of the three energy exchanges—Hindustan Power Exchange Ltd., Indian Energy Exchange Ltd., and HPL Electric and Power Ltd.—will be used to determine the pricing.

The monthly electricity contracts will have a maximum order size of 2,500 MWh, a trading unit of 50 MWh, and a tick size of Re 1 per MWh.

 

The Securities and Exchange Board of India (Sebi) gave the NSE permission to start offering monthly electricity futures contracts last month.

The Niti Aayog research estimates that India will need to invest more than USD 250 billion annually till 2047 in order to meet its net-zero emissions target.

The size of the derivatives market worldwide is two to four times that of the actual power exchanged. 20 percent of market wide open positions (MWOP) or 3 million MWh would be made available to members (collectively for clients) by the NSE. It will be 300,000 MWh, or five percent of MWOP, for people.

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According to the Futures Industry Association's data, the NSE is the biggest derivatives exchange in the world in terms of contract volume traded. It monitors listed businesses, clearing members, and traders' compliance.