Electricity futures to help discoms, producers: Experts

India's move to introduce electricity futures contracts, joining the ranks of mature power markets that use such tools to hedge short- and medium-term price fluctuations, is expected to benefit both distribution companies and the commercial and industrial segment, industry experts said.

The National Stock Exchange and the Multi Commodity Exchange last month received the Securities and Exchange Board of India's approval to launch electricity futures, a financial product aimed at helping participants manage price volatility and improve long-term planning.

The launch is particularly significant for India as the country navigates economic growth and energy transition and needs to manage price risk.

The electricity futures contract allows generators to lock in sale prices in advance, ensuring revenue stability even during times of falling spot prices. At the same time, distribution companies and industrial consumers can hedge against unexpected price spikes.

It will also provide flexibility and certainty of supply to both discoms and producers and help develop the price signal needed to incentivise supply into peak demand periods which is key to enabling battery deployments and demand response management, Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis, told ET.

Markets in Europe, the US and China have shown that electricity derivatives play a key role in stabilising prices and offering long-term visibility to market participants, Garg said.The contract is designed to attract a range of players - from institutional investors and energy traders to large commercial consumers such as hotels, malls and corporations. India's power generation in FY25 was about 1,830 billion units.