CERC Bulldozes Market Coupling Plan, Sinks IEX Stock Price

The Central Electricity Regulatory Commission (CERC), which also oversees India's power exchanges as the key regulator, has pushed yet again for a market coupling mechanism for power trading in the country. The Commission has been following a government mandate to explore this route in the hope of getting not just a uniform price for power trading across exchanges but also lower costs in the long term. Under this regime, if implemented, power exchanges will primarily act as platforms to receive bids and dispatch power, reducing their role in price discovery. The move aims to enhance transparency and efficiency in the power market. Under discussion since 2021-22, the push has failed to gain traction for various reasons until now.

The Commission had, in its order dated 6.2.2024, decided to implement a shadow pilot on Power System and Cost Optimization through Market Coupling. Grid Controller of India (Grid India) was directed to implement the following on a shadow pilot basis: (a) coupling of the RTM of the three power exchanges; (b) separate coupling of the RTM at the three power exchanges along with SCED; and (c) coupling of DAM of the three power exchanges. 

Grid India was directed to:

1. Develop, within two months from the date of the 2024 Order, the necessary software as required for running the shadow pilot for coupling of RTM of the three power exchanges, as well as coupling of RTM & SCED, and for coupling of DAM of the three power exchanges. The software so developed should be scalable for running the shadow pilot for coupling of DAM and SCUC, as and when decided by the commission.  
2.  Implement the shadow pilot of coupling (a) RTM of the three power exchanges, (b) RTM and SCED, and (c) DAM of the three power exchanges, for a period of four  months after the development of the necessary software, based on the directions 
   contained in the Order.  
3. Share the operational experience of running a shadow pilot in the form of a monthly report during the period of four months and a feedback report at the end of the four-month period.  
4. Suggest the feasibility of coupling of the DAM and SCUC within two months from the date of the Order.  

While directing the exchanges to share data with Grid India, the commission also stated it would take a call post the results of the pilot. Which is where it gets more interesting.

Grid India Feedback On Pilot 

Grid-India, vide its letter dated 13 February 2024, raised some concerns on the strict timelines provided for implementing the shadow pilot of market coupling and also requested for constituting a Committee be constituted for harmonization of bid structure and other related issues. The Commission granted an extension to Grid-India to develop and deploy the necessary software as required for running the shadow pilot, and also decided to constitute a Committee to deliberate on various aspects relating to the shadow pilot of market coupling.

The Committee held five meetings and deliberated on various aspects to ensure smooth implementation of shadow pilot of market coupling, including the timely development of in-house coupling engine by Grid-India and its validation, running of the coupled engine for RTM and DAM on D+1 basis, formulation of coupling of RTM with SCED, submission of data by the power exchanges through API, etc.  Grid-India submitted a report on 16 January 2025 and also made submissions including the experience gained by it in developing and validating the coupling engine using historical data of about 29 months, results of the shadow pilot run based on historical data, and challenges in the formulation of RTM-SCED coupling. Grid-India highlighted the need for bringing uniformity in clearing algorithms and bid structures across exchanges for rolling out market coupling, and also suggested that full-fledged roll-out of market coupling may be considered with the three power exchanges acting as the Market Coupling Operator  (MCO) in a round-robin manner.  

The Commission noted that the above submissions of Grid-India were based on the historical data, whereas the Commission had wanted Grid India to “share the operational experience of running a shadow pilot in the form of a monthly report during the period of four months and a feedback report at the end of the four-month period”.

On June 30, 2025, Grid-India submitted the  “Feedback Report on D+1 run of Shadow Pilot on Power System & Cost Optimization through  Market Coupling for the four-month period from 1 December 2024 to 31 March 2025”. 

A Summary of the results of D+1 run of Shadow Pilot for different market segments for the four-month period from 1 December 2024 to 31 March 2025 makes it clear that the results were none too encouraging.  

1. In case of DAM coupling, the overall welfare increases by ₹38 Cr (0.3%), overall  volume cleared increases by 52 MU (0.2%), negligible impact on price due to  skewed liquidity and welfare increases in every session in line with the objective 
   of coupling. 
2. In case of RTM coupling, the overall welfare increases by ₹72 lakh (0.01%),  overall volume cleared increases by 1.54 MU (0.01%), negligible impact on price due to skewed liquidity and welfare increases in every session in line with the objective of coupling. 
3. In case of RTM-SCED coupling, the overall net savings improve by ₹1.4 crore/day in the coupled scenario; despite the reduction in aggregate costs, the average cost increases by ₹ 1/MWh in the coupled scenario due to reduced demand catered; and  ACP volatility reduces in the coupled scenario. 

Based on the submissions made by Grid-India and various consultations held and as per the provisions of Market Coupling specified in Regulations 37 to 39 of the PMR 2021, the  Commission has decided to stick to its mandate to promote market coupling irrespective of these none-too-impressive results, and  initiate the process for implementing market coupling in a phased manner as under:  

1.  Implementation of the coupling of Day-Ahead Market (DAM) of the power exchanges in a round-robin mode by January 2026. Under the round-robin mode, the power exchanges may act as the Market Coupling Operator (MCO) on a rotational basis, with Grid-India being the fourth MCO for backup and audit purposes. 
2. Given the shorter time for bid submission and running the market clearing engine,  the decision to implement the coupling of Real-Time Market (RTM) of the power exchanges shall be considered at a later stage after gaining operational experience from the coupling of DAM.  
3. There is a need to further examine the approach and methodology of the shadow pilot run of coupling of RTM with SCED adopted by Grid-India. The Commission is of the view that some of the complexities involved in RTM-SCED coupling, as highlighted by Grid-India, could be addressed through suitable regulatory interventions and after stakeholder consultation.
4.  The feasibility of coupling the Term-Ahead Market (including Contingency Contracts) of the power exchanges also needs to be examined by running a shadow pilot. 

The Commission has also directed the staff of the Commission to initiate  the consultative process with Grid-India and power exchanges on various operational and  procedural aspects for implementing the coupling of DAM, and also propose the regulatory 
amendments with respect to the implementation of market coupling.

The Commission has also directed Grid-India to develop the necessary software for running the shadow pilot for coupling TAM (including Contingency Contracts) of the power exchanges.  Post development of necessary software, Grid-India shall implement the shadow pilot for coupling TAM (including Contingency Contracts) of the power exchanges for three months and share the operational experience of running the shadow pilot thereafter in the form of a feedback report to the Commission. 

Conclusion: Based on the Commission's actions, it is apparent that it is quite resolute in its desire to force a market coupling mechanism into the market, however limited the impact might seem for now. In the best case scenario, DAM and more categories could be made a part of this push by the end of 2026. However, there remains the risk that other stakeholders, in case they are unimpressed by the results, push for a return or maintenance of status quo, which is not as unlikely as it seems, considering the huge comfort many have indicated with IEX so far. As Chairman and managing Director Satyanarayan Goel said at an analyst meet in April this year, " It is because of the kind of services which we provide and the robust technology platform which  we have, on which there has been no problem in the last 17 years and the financial reconciliation  settlement, everything we do on time. And in addition to that, we also provide a lot of data  analytics to them. So I think because of all that only the customers are staying with us. Even  today also, the customers are staying because of that only. And in future also, I'm sure we will  be able to retain a large part of the customer base".

That claim is ready to be put to the test soon.