IEX Q3 FY’26: From Cheap Power to Tightening Prices as Buyers Shift from DAM to TAM

The Indian Energy Exchange (IEX), the country’s premier marketplace for electricity, delivered strong double-digit volume growth in Q3 FY’26 even as market conditions shifted sharply by December. The quarter marked a transition from a surplus-driven, low-price environment to a tightening landscape with rising prices and evolving trading strategies.

 The exchange achieved a total electricity traded volume of 34.08 billion units (BU), marking 11.9 percent increase compared to the same period last year. The green market saw active participation, with IEX facilitating the trade of 18.63 lakh Renewable Energy Certificates (RECs) throughout the quarter.

The quarter was characterised by a healthy improvement in supply liquidity, driven by a combination of higher generation from hydroelectric and wind sources alongside steady output from coal-based plants. 

In December 2025 alone, IEX recorded a monthly electricity volume of 11.44 BU (excluding TRAS), a 2.8 percent year-on-year rise. The month also saw strong momentum in the certificate market, with 7.7 lakh RECs traded. 

While the overall quarterly growth was double-digit, the data from December suggests a distinct shift in market dynamics as the quarter drew to a close, indicating a transition in supply-demand trends moving into the final months of the fiscal year.

The Pivot from Deflation to Tightening

The data for Q3 FY'26 and December 2025 reveal a distinct change in trend occurring at the end of the quarter. While Q3 was characterised by robust volume growth (+11.9 percent) and deflationary pricing (~13 percent decline), December signalled a sharp reversal. The volume growth decelerated significantly, and prices flipped from negative to positive year-on-year (YoY) growth.

This indicates a market transitioning from a period of oversupply and liquidity (driven by hydro/wind in Q3) to a tightening environment in December, likely driven by the 7 percent surge in national energy consumption. 

Furthermore, there is a structural shift in procurement behaviour, with participants abandoning the Day-Ahead Market (DAM) in favour of hedging via the Term-Ahead Market (TAM) and managing volatility in the Real-Time Market (RTM).

1. Price Trend Analysis: The Inflationary Flip

The most significant shift in the current market landscape is the abrupt reversal in pricing direction. 

Throughout much of Q3, Distribution Companies (Discoms) operated within a favourable buyer’s market, capitalising on downward price trends. However, the developments in December effectively erased those gains, pivoting the market back toward a state of slight inflation.

This change is particularly striking when viewed in the broader context of Q3 FY'26. Earlier in the quarter, high liquidity - driven by robust contributions from hydro, wind, and coal - led to a sharp decline in clearing prices. During this period, Day-Ahead Market (DAM) prices fell by 13.2 percent year-over-year, averaging INR 3.22/unit.

By December 2025, the market dynamic had shifted despite the high pricing base of the previous year. Prices began to creep upward, with DAM rates rising 0.7 percent year-over-year to reach INR 3.92/unit. This reflects a substantial 21.7 percent increase in absolute cost from the Q3 average, signalling an immediate tightening of supply and a departure from the earlier surplus conditions.

Price Trend Reversal: Q3 FY'26 Average vs. December 2025 

The window of "cheap power" seen in early Q3 appears to be closing. The 7 percent rise in national consumption in December is exerting upward pressure on prices, neutralising the supply-side gains seen earlier in the quarter.

2. Volume & Segment Analysis: The Flight to Flexibility

While overall volume growth remained positive, the momentum slowed drastically, and the mix of products traded changed fundamentally.

The market underwent deceleration as the overall volume growth collapsed from a robust 11.9 percent in Q3 to just 2.8 percent in December.

In addition, it saw a structural shift to TAM, a clear migration away from the Day-Ahead Market. While the DAM contraction deepened from -2.8 percent in Q3 to -11.6 percent in December, TAM (Term-Ahead) exploded with growth accelerating from 29.3 percent in Q3 to 87 percent in December.

Volume Growth Divergence: Shift from Day-Ahead to Term Markets

The surge in TAM (+87 percent), coupled with the decline in DAM, suggests that Discoms are prioritising security of supply over spot opportunism. Facing rising consumption and the price uptick in December, buyers aggressively locked in weekly/monthly contracts (TAM) rather than risking exposure to the daily spot market (DAM).

3. Green Market & REC Trends

The renewable segment showed visible fatigue by quarter-end.

The positive growth in Green Market of 7.2 percent seen throughout Q3 evaporated in December (-0.5 percent), aligning with the broader slowdown in liquidity. 

The massive 53.7 percent drop for Renewable Energy Certificates (RECs) suggests that the initial rush to meet green energy targets for the year might be cooling down. This usually happens when the market reaches a point where most large companies have already satisfied their regulatory requirements for the quarter.