NSE gets Sebi nod to launch electricity futures. 3 things exchange expects to achieve
NSE has received approval from the capital market regulator Securities and Exchange Board of India (Sebi) to launch monthly electricity futures contracts. The move comes with a view to deepen India's power markets and support long-term structural reforms initiated under the Electricity Act, 2003.
ADVERTISEMENT In a press release issued on Wednesday, NSE called it a "significant milestone".
"India's journey toward achieving its net-zero emissions target demands substantial investment—estimated at over $250 billion year on year till 2047 as per Niti Aayog report. By 2030, renewable energy sources such as solar and wind are expected to contribute over 50% of the nation's installed power capacity. A robust and dynamic electricity derivatives market is essential to attract this scale of climate finance from both domestic and global investors," the release said.
Through the launch of monthly electricity futures, the NSE aims to achieve 3 things :1) Provide market participants with effective hedging tools against electricity price volatility.2) Enable more accurate price signals in the power sector.
ADVERTISEMENT 3) Encourage capital investments across the electricity value chain—generation, transmission, distribution, and retail.Commenting on the development, NSE MD & CEO Ashishkumar Chauhan said, "This approval is only the beginning of NSE's vision for a broader electricity derivatives ecosystem. Plans are underway to gradually introduce contracts for difference (CFDs) and other long-duration electricity derivatives such as quarterly and annual contracts subject to regulatory approvals.'
ADVERTISEMENT In his view, a calibrated and phased approach will ensure both market integrity and investor confidence and it is crucial for the spot and futures electricity markets to evolve in tandem to create a virtuous cycle of liquidity and stability.A financially settled futures market will allow participants to hedge their risks effectively while a robust day-ahead spot market will ensure reliable price discovery, Chauhan said.
ADVERTISEMENT Sebi nod to the NSE comes on the heels of an approval given to MCX to launch its own electricity derivatives.
Also Read: MCX gets Sebi nod to launch electricity derivatives
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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