India’s electricity market is on the cusp of a transformative shift. With the Central Electricity Regulatory Commission (CERC) set to roll out market coupling in the Day-Ahead Market (DAM) by January 2026, the nation is moving closer to its ambitious ‘One Nation, One Grid, One Price’ vision.
This groundbreaking reform, championed by power exchanges like Hindustan Power Exchange (HPX) and Power Exchange India Ltd (PXIL), promises to reshape how electricity is traded, fostering competition, transparency, and efficiency in the power sector. But what does this mean for India’s energy landscape, and why is it such a vital step? Let’s dive into the details.
What is Market Coupling and Why Does It Matter?
Market coupling is a revolutionary model that aggregates buy and sell bids from India’s three power exchanges—Indian Energy Exchange (IEX), HPX, and PXIL—to establish a uniform market clearing price (MCP). Imagine a bustling marketplace where every vendor sells the same product at different prices. Market coupling is like introducing a single price tag for all, ensuring fairness and efficiency. By pooling bids through a centralized algorithm, this system ensures that electricity is traded at a consistent price across all exchanges, optimizing transmission usage and enhancing market liquidity.
This reform is particularly significant in the Day-Ahead Market (DAM), where electricity is traded for delivery the next day in 15-minute time blocks. Currently, each exchange operates independently, leading to price disparities for the same commodity—electricity.
Harish Saran, Managing Director of HPX, explains, “By enabling uniform price discovery across exchanges through a centralized algorithm, market coupling will foster competition, optimize transmission usage, and ensure fair and transparent access for all participants.” This move is expected to level the playing field, especially for smaller exchanges like HPX and PXIL, which have struggled against IEX’s dominant market share.
The ‘One Nation, One Grid, One Price’ Vision
The ‘One Nation, One Grid, One Price’ framework, sometimes referred to as ‘One Nation, One Grid, One Frequency, One Price,’ is a bold initiative to create a unified electricity system across India. It envisions a seamless national grid where power flows freely across states, supported by a single pricing mechanism. This vision aligns with the government’s goal of shifting from long-term power purchase agreements (PPAs) to a more dynamic, market-driven system. By integrating power exchanges, market coupling is a critical step toward achieving this unified grid.
Satyajit Ganguly, CEO and MD of PXIL, emphasizes its importance: “Market coupling is an essential next step in moving towards the ‘One Nation, One Grid, One Price’ framework, which would lead to optimization of dispatch of available capacity, better grid operation, higher liquidity, and innovation.” This framework not only streamlines electricity trading but also supports India’s renewable energy goals by creating a more flexible and efficient market structure.
Breaking the Monopoly: A New Era of Competition
India’s power exchange landscape has been dominated by IEX, which currently holds nearly 85% of the exchange-traded volumes in the Day-Ahead Market. This concentration has limited the growth of HPX and PXIL, which together account for the remaining share. Market coupling is poised to disrupt this status quo. As Saran notes, “With market coupling, all three exchanges will have volumes. HPX will stand to gain. IEX will lose some market share in the DAM since currently all the volumes are concentrated there.”
This shift is expected to foster healthy competition among exchanges, encouraging innovation in product offerings and service delivery. For instance, PXIL has been proactive in designing futuristic products like the Green-Real Time Market (G-RTM) and High Price-Real Time Market (HP-RTM), which cater to the growing demand for renewable energy trading. By leveling the playing field, market coupling ensures that no single exchange monopolizes the market, ultimately benefiting consumers through competitive pricing and improved services.
The Role of Market-Based Economic Dispatch (MBED)
Market coupling is not just about uniform pricing; it’s a stepping stone toward the broader implementation of Market-Based Economic Dispatch (MBED). MBED envisions a centralized scheduling system for electricity dispatch across India, prioritizing power plants with the lowest costs through a national merit order. This ranking system ensures that cheaper power sources are utilized first, while more expensive ones are tapped only when necessary, optimizing overall system efficiency.
“MBED will also improve the overall system efficiency. At HPX, we are committed to supporting a power market that is data-driven, cost-efficient, and future-ready,” Saran adds. By integrating market coupling with MBED, India aims to create a centralized dispatch system that operates at both inter-state and intra-state levels, replacing the fragmented approach currently in place. This could significantly reduce power tariffs in the long run, making electricity more affordable for consumers.
Challenges and Opportunities
While market coupling holds immense promise, it’s not without challenges. Aligning bidding formats, upgrading software systems, and ensuring real-time coordination among exchanges require significant technical and operational efforts. There’s also a concern that centralizing price discovery might limit the role of individual exchanges, potentially stifling innovation. However, CERC has clarified that competition will continue in areas like user experience, service quality, and product innovation, ensuring that exchanges remain relevant.
On the opportunity side, market coupling is expected to enhance liquidity in the power market, making it easier for buyers and sellers to trade electricity. It also paves the way for introducing electricity derivatives, which could provide hedging opportunities for market participants. Moreover, by optimizing transmission corridors, market coupling ensures efficient use of India’s grid infrastructure, supporting the integration of renewable energy sources like solar and wind.
| Aspect | Current Scenario | With Market Coupling |
|---|---|---|
| Price Discovery | Varies across IEX, HPX, and PXIL | Uniform MCP across all exchanges |
| Market Share | IEX dominates (~85% in DAM) | Balanced volumes among IEX, HPX, and PXIL |
| Transmission Usage | Suboptimal due to fragmented pricing | Optimized through centralized algorithm |
| Competition | Limited by IEX’s dominance | Enhanced, fostering innovation and efficiency |
| Consumer Impact | Higher costs due to price disparities | Potential for lower tariffs and transparency |
The Road Ahead: January 2026 and Beyond
The CERC’s decision to implement market coupling in the Day-Ahead Market by January 2026 marks a pivotal moment for India’s power sector. While real-time and term-ahead market coupling has been deferred due to technical complexities, the focus on DAM is a strategic move, given its significance in electricity trading.
An IEX official noted that DAM now accounts for 35% of its total volumes, down from 80% earlier, as real-time markets gain traction. This shift underscores the dynamic nature of India’s electricity market and the need for reforms like market coupling to keep pace.
As India moves toward a more integrated and efficient power market, collaboration among regulators, policymakers, and market players will be crucial. Grid-India, tasked with overseeing the implementation, will play a pivotal role as a backup Market Coupling Operator (MCO) and auditor. The success of this reform will depend on robust algorithms for price discovery, congestion management, and grid stability, ensuring that the benefits of market coupling are fully realized.
A Brighter, More Unified Energy Future
The introduction of market coupling is more than a technical reform; it’s a bold step toward a more equitable and sustainable energy ecosystem. By breaking down barriers in electricity trading, India is paving the way for a unified grid that delivers affordable, reliable power to every corner of the country.
As Ganguly aptly puts it, “Market coupling will strengthen competition, leading to fructification of multiple power exchanges that will ensure product innovation, efficiency in service delivery, no entry barriers for new power exchanges, and control on transaction fees.”
For consumers, this means the promise of lower electricity costs and greater transparency. For the power sector, it’s an opportunity to innovate and adapt to the growing demands of a renewable-driven future. As India gears up for this transformative journey, the ‘One Nation, One Grid, One Price’ vision is no longer a distant dream—it’s a reality taking shape, one reform at a time.
Sources: Moneycontrol, Economic Times, IEEFA, and various media sites.
