Commodity Online
MUMBAI: MCX (Multi Commodity Exchange of India Ltd), India’s leading commodity futures exchange, on Friday announced the launch of futures trading in “Electricity.” This is the first time in India when electricity will be available for futures trading. MCX received the approval from the regulator – FMC and launched the weekly and monthly electricity contracts today. The first trade was executed in March monthly contract at Rs. 7,300 per MWH.
On the development, Joseph Massey, MD & CEO, MCX said, “This is another significant milestone and a moment of pride for the Indian Commodity Markets. India has joined the select group of developed countries which offers electricity futures on an exchange platform. With this MCX has now further diversified its basket of energy products after crude oil, furnace oil, natural gas and aviation turbine fuel. Now the entire industry will be able to mange price risk on energy related raw material or output better on MCX which already account for 98% of the entire energy related future market.”
“The Large number of participants (including Inter State Generating Stations (ISGS), Distribution Licensees, State Generating Stations, CPPs and IPPs, Electricity Traders and others) are exposed to price risk due to uncertain demand & supply and volatile prices. The launch of electricity futures will smoothen the price curve in the medium to long run that will help the market participants to facilitate price discovery and take informed decision looking at the futures prices,” added Mr. Massey.
The total Annual Market Size (Electricity Generation) in 2007-08 is Rs 2,00,000 crores (for 665 Million MWh @ Rs. 3000 / MWh) i.e. about 665 billion units. The present short term market per year is around 4% to 5% of the total market i.e. Rs 13500 crores (30 Million MWh @ 4500 per MWh) which is equivalent to about 30 billion units.
The contracts will have trading unit as 1MW x 24 hrs with tick size as Rs. 1 per MWH. The trading days will be from Monday to Saturday with trading timings as 10 am to 11:55 pm except Saturdays which will be from 10 am to 2 pm. The delivery will be optional for both buyers & sellers and Due Date Rate (DDR) will be average of daily system prices of day-ahead market of Indian Energy Exchange (IEX) for delivery during the contract week / month. At any point of time 8 weekly contracts and 4 calendar month contracts will be available for trading.
Globally Nordpool in Sweden, Norway, Finland & Denmark, Inter Continental Exchange in UK, Powernext SA in France, EEX in Germany, PLM in USA and ASX in Australia offers electricity futures trading platform.
