India’s power market continued to deepen in 2025-26, supported by growing electricity demand, rising renewable energy integration and a series of regulatory initiatives aimed at enhancing market efficiency and flexibility. Short-term transactions accounted for nearly 18 per cent of the country’s total electricity trade, with power exchanges maintaining their position as the preferred platform for competitive procurement and real-time balancing. The real-time market (RTM) remained the fastest growing segment of the power market in 2025-26. The segment’s expansion has been driven by discoms and generators seeking to manage demand-supply imbalances closer to the time of delivery, while also optimising procurement costs. Lower market clearing prices and improved liquidity further supported participation, reinforcing the RTM’s role as an important balancing mechanism for the power system.
Meanwhile, the power market witnessed significant regulatory evolution. Key developments included progress towards market coupling, the introduction of virtual power purchase agreements (VPPAs), reforms to renewable energy certificate (REC) mechanisms, and discussions on capacity market design to support long-term resource adequacy. The launch of electricity derivatives further expanded the range of risk management tools available to market participants.
Power market overview
In 2025-26, a total of 1,707 BUs of electricity was transacted in the country, of which 302.08 BUs was traded through the short-term market. The three power exchanges – Indian Energy Exchange (IEX), Power Exchange of India Limited (PXIL) and Hindustan Power Exchange Limited (HPX) – recorded a total traded volume of 168.55 BUs during the year. The power exchange segment was dominated by the IEX, which accounted for 84 per cent of the total exchange-traded volume, with transactions of 141.14 BUs in 2025-26. PXIL and HPX recorded traded volumes of 18.35 BUs and 9.06 BUs respectively, contributing 11 per cent and 5 per cent of the total power exchange market.
Bilateral trading and deviation settlement accounted for 96.04 BUs and 37.49 BUs, respectively, during 2025-26. Of the total bilateral volume, 37,546.92 MUs was transacted through direct contracts, while 58,490.74 MUs was traded through licensed traders. Overall, short-term transactions accounted for 17.7 per cent of the total electricity transacted in the country during the year, with power exchanges contributing 9.87 per cent of the total volume.
Regulatory updates
Market coupling
In July 2025, the Central Electricity Regulatory Commission (CERC) issued a suo motu order to roll out market coupling under its Power Market Regulations, 2021. The order was aimed at synchronising the day-ahead market (DAM) across all power exchanges using a round-robin system by January 2026, and later testing RTM and TAM coupling via shadow pilots. The move is expected to introduce uniform prices across exchanges, improve price discovery, enhance market liquidity and create a more level playing field for participants.
In April 2026, the CERC issued the draft CERC (Power Market) (Second Amendment) Regulations, 2026. Under the amendment, Grid Controller of India Limited has been designated as the market coupling operator responsible for the operation and management of market coupling through a separate dedicated cell. The proposed framework provides for market coupling in the DAM, RTM and other market segments, under which bids from all power exchanges will be aggregated to determine a uniform market clearing price.
Staff paper on capacity markets
In May 2026, the CERC issued a staff paper on capacity markets for electricity in India. The current PPA-led framework does not always guarantee the required generation capacity during system stress, especially in scenarios when renewable penetration grows and peak demand surges. In this regard, the staff paper on capacity markets for electricity in India proposes three capacity market mechanisms – capacity market for resource adequacy/capacity obligation, reserve capacity market and secondary/short-term capacity market.
VPPAs
In December 2025, the CERC issued guidelines for VPPAs to ensure compliance with renewable consumption obligation (RCO) targets by designated consumers. The guidelines, notified under the CERC (Power Market) Regulations, 2021, provide a regulatory framework for VPPAs as non-transferable specific delivery-based over-the-counter contracts. Under the framework, a VPPA is defined as a bilateral arrangement between a renewable energy generating station and a consumer or designated consumer, under which the generator sells electricity through a power exchange or other authorised modes, while RECs issued for the contracted capacity are transferred to the consumer for renewable purchase obligation or RCO compliance.
In June 2025, the CERC released draft amendments to the Power Market Regulations, 2021. These recognise VPPAs, expand over-the-counter markets to include battery storage and banking contracts, and enhance regulatory oversight. The reforms are aligned with new transmission access rules and are expected to deepen liquidity, accelerate renewable procurement and improve operational flexibility. In May 2025, the CERC issued draft guidelines for VPPAs, offering corporates a flexible route to meet renewable obligations through bilateral contracts.
Electricity derivatives
In July 2025, the Securities and Exchange Board of India approved the launch of monthly baseload electricity derivatives on the Multi Commodity Exchange and the National Stock Exchange (NSE). The MCX launched its contracts on July 10, 2025, followed by the NSE on July 14, 2025. To encourage participation, both exchanges have introduced incentives such as liquidity schemes and fee waivers. These contracts provide generators, discoms and large consumers with a mechanism to hedge against price volatility from demand, weather and fuel costs, strengthening India’s electricity derivatives market.
Other updates
In May 2026, the CERC notified the draft CERC (Deviation Settlement Mechanism and Related Matters) (Third Amendment) Regulations, 2026. The draft replaced time block-wise weighted average area clearing price (ACP) with a daily weighted average ACP for deviation charge computation, shifting the benchmark from time-block to daily average pricing. It also proposed stricter deviation treatment for wind-solar projects bid on or after January 1, 2027, and projects commissioned on or after January 1, 2029, bringing them at par with general sellers.
In March 2026, the CERC notified the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) (First Amendment) Regulations, 2026. The amendment expanded the scope of the REC mechanism to include captive generating stations with self-consumption of renewable energy that do not meet the conditions of captive generating plants under the Electricity Rules, 2005. It also introduces the definitions of designated consumers, RCOs and VPPAs.
Outlook
The past year marked another step forward in the evolution of India’s power market. Rising trading volumes, growing participation in green and real-time markets and a series of regulatory reforms underscore the increasing importance of market-based solutions in the sector. Going forward, the success of initiatives such as market coupling and new market products will be key to supporting renewable energy integration, improving price discovery and strengthening overall power system efficiency.
Aastha Sharma
