Indian Energy Exchange Ltd
Chairman Speech
Message to Shareholders
economy in the world, well-positioned to become a $5 trillion GDP economy in this
decade. The IndiaEconomic Survey 2022-23 has projected a baselinecontinues
to be the fastest growing major GDP growth of 6.5 percent in real terms for FY24,
closely following the robust growth of 7.2 percent in FY23. India's Index of Industrial
Production for FY23 grew 5.1 percent year-on-year (YoY). Electricity, being the bedrock of
all industrial and commercial activity, saw a consequent surge in demand. As per the
Central Electricity Authority (CEA), power consumption rose 9.4 percent on YoY basis to
reach 1,504 billion units (BU) in FY23. India's daily peak power demand reached 221 GW in
May 2023, which was the highest-ever daily peak recorded (at the time) in the country.
The government's focus on electrification as a means to achieve decarbonisation - from
cooking to railway traction, and electric vehicles - will contribute significantly to an
increase in power consumption in the country. It is projected that India would contribute
to approximately 25 percent of the total global energy demand growth by 2040. This
provides a massive growth potential for the country's electricity sector. Currently,
India's per-capita electricity consumption is only about one-third of the global average.
This further presents a huge opportunity for the electricity sector, which is expected to
increase at a rate of over 6 percent per annum for the next five years.
Today, India is the only country among the G20 nations which is on track to achieve its
targets under the Paris Agreement, highlighting its far-reaching new initiatives in
renewable energy, e-mobility, ethanol blended fuels, and green hydrogen, as alternate
energy sources. The country's G20 presidency this year presents an unprecedented
opportunity for the country to showcase this extensive sustainability roadmap.
Standing Strong Amid Global Headwinds
While global economies were impacted due to disruptions caused by the adverse
geopolitical situation in 2022, the Indian economy grew from strength-to-strength.
Increased industrial activity backed by strong private consumption, higher capital
expenditure, and a robust financial sector, contributed to India's sustained growth story.
This also speaks volumes about the resilience of the country's energy sector, given the
backdrop of a severe fuel supply crunch across the world. Expanded diversity of energy
sources, and a decisive shift towards renewable energy sources, shielded the country from
adverse impacts of the global energy crisis. Critical interventions by the Government of
India helped improve domestic fuel production and ease supply constraints and allowed
India to stand strong in the face of this global energy crisis.
India has targeted to achieve renewable energy capacity of 500 GW by 2030 and reach net
zero carbon emission by 2070. The present renewable capacity at 174 GW (as on 31st
May 2023), represents 42 percent of total installed capacity of 418 GW. India has the
fastest renewable energy (RE) capacity addition among major economies, having added 15 GW
of RE capacity in the last fiscal. About 83 GW of green energy capacity is under
implementation and another 41 GW of renewable energy generation infrastructure is under
various stages of tendering. Further, the government aims to tender 50 GW of RE capacity
every year by 2030. Power markets will serve as a catalyst for accelerating this renewable
generation capacity addition in the country. The draft modified National Electricity
Policy aims to increase the share of exchanges to 25 percent by 2030, underlining their
importance in the energy transition of the nation.
Globally, power exchanges have played a crucial role in reducing the cost of renewable
integration and providing efficient price signals for newer capacity addition. Power
markets are crucial in managing the intermittencies of renewables by efficient integration
with conventional power. As India marches towards achieving its net zero targets, there
will be a much larger role of power exchanges in the country's energy landscape.
Policy and Regulatory Enablers
Conducive policies and regulations continued to fast-track the nation's energy
transition towards sustainability and self-sufficiency.
The Draft National Electricity Policy encourages market based RE development and
aggregation of small capacity for development of renewables. It also allows
interchangeability among various buckets of Renewable Purchase Obligations to provide
flexibility to distribution licensees.
General Network Access (GNA) was notified during the year and its implementation will
go a long way in streamlining network access and network usage charges. GNA will
strengthen exchange-based power markets in the country. Further, it will remove regulatory
arbitrage which has led to the temporary shift in volume from Day Ahead Market (DAM) to
Day Ahead Contingency (DAC) and will be more conducive towards further market development
in the country.
The Electricity (Amendment) Rules 2022 are expected to promote renewable energy through
open access to green power. This should deepen the electricity markets and efficiently
integrate RE resources into the grid. The Green Open Access Rules 2022 have reduced the
open access limit from 1 MW to 100 KW, while there is no minimum limit for captive
consumers. This will allow smaller prosumers to buy or sell RE power and increase access
to renewables.
The Electricity (Amendment) Bill, 2022 proposes several reforms to the distribution
sector, promotes private participation, better service, and improved financial health.
The Energy Conservative (Amendment) Act, 2022 allows for the development of a national
carbon market in India.
The Deviation Settlement Mechanism and Related Matters Regulations, 2022 is expected to
reduce overdrawl and increase RTM volumes on the Exchange.
The emphasis on green growth as a priority in the Union Budget is a testament to the
government's commitment towards sustainability. An allocation of 35,000-crore for energy
transition and energy security will accelerate decarbonisation of the power sector. The
prominence given to energy storage projects that are critical to scale up renewable energy
capacity, complements India's net-zero carbon emissions target of 2070. In line with the
country's decarbonisation targets, several enabling interventions were taken towards
increasing the generation and adoption of renewable energy sources:
Renewable Purchase Obligations (RPO) currently mandates states to procure 25 per cent
of their electricity needs from renewable sources. These are to be scaled up to 43 per
cent by the fiscal year 2030.
Inter State Transmission (ISTS) charges have been waived off for renewable energy to
reduce the cost of integration, while new transmission infrastructure is being set up to
improve access to power.
The RPOs mandate new coal or lignite-based thermal plants to establish RE capacity of a
minimum of 40 percent of the plant's capacity or procure and supply renewable energy
equivalent to such capacity.
Recently, the group for ‘Development of Electricity Market in India' constituted
by the Ministry of Power, has charted out a road map for deepening the power market. Power
markets have been identified as platforms that play an instrumental role in accelerating
India's energy transition by enabling smooth integration of renewable energy into the
grid. Some key recommendations of the group - such as mandating renewable energy resources
to participate in the market and additional RE capacity to be developed through the
Contract for Difference (CfD) mechanism - will facilitate faster addition of RE capacities
and spur investment in the sector, thus helping India attain its 2030 targets for
renewables. To increase RE participation in the market, a pilot mechanism has been
proposed for implementation within a year. An initial capacity of 1,000MW will be tendered
by the nodal agency under the CfD model option with a 15-year PPA tenure. The CfD model
will help further deepen the market by providing certainty to generators by guaranteeing a
fixed price for a set period. These initiatives are expected to increase the
sustainability and viability of the country's power sector and pave the way to achieve the
country's net zero targets. International experience shows that in well-developed power
markets such as the European Union,the UK,andtheUS,powerexchangeshaveplayed a crucial role
in reducing the cost of RE integration. In India too, power exchanges are expected to play
a crucial role in the country's sustainability aspiration through green market products.
IEX will remain at the forefront of this transition by constantly innovating products and
segments to meet the evolving needs of all stakeholders.
Additionally, the Ministry of Power has shared a letter with CERC to look into Market
Coupling. We are confident that all aspects, such as the objective of coupling and need in
the current market framework, will be examined by the honourable regulator, before
undertaking the next steps. I want to assure you that the current market operations of
your company would continue undisrupted.
IEX – Pioneering India's Power Market for the Past 15 Years
I feel both proud and humbled to note that IEX is celebrating 15 years of transforming
India's power markets. This momentous journey, from trading 2 BU of electricity volumes in
FY 2009 to about 100 BU annually at present, reflects the trust of market participants in
the country's power markets and in IEX. We have traded a cumulative volume of nearly 700
billion units, with a growth of about 30 percent CAGR since inception.
With technology and innovation at the core, your company has been at the forefront of
introducing new products and market segments, aligned with India's economic and
decarbonisation targets. IEX has played a humble role in India achieving its
‘One-Nation One-Grid One- Price' vision. Your company enabled competitive procurement
for commercial and industrial consumers of 1 MW and above to buy directly from the
exchange. IEX created a green market in the country through innovative products such as
the Renewable Energy Certificate, Green Day-Ahead, and Green Term-Ahead segments.
Since its inception, IEX has been truly benefitting the power sector. Competitive power
prices discovered on our platform serve as the benchmark for power purchase for long,
medium, and short-term basis. These transparent and market-discovered prices provide
signals for future capacity addition. Additionally, exchange discovered competitive
prices, coupled with flexible procurement, have helped distribution utilities accrue
significant savings and improve their efficiency.
Our best-in-class exchange technology has enabled maximisation of social welfare and
competitive price discovery. Today, the IEX platform that comprises 7,500+ participants,
has introduced efficiency, transparency, flexibility in procurement, and payment security
across the entire power sector value chain. These milestones have been possible only due
to the unwavering faith and support of all our partners, employees, and stakeholders.
Green Markets Enabling India's Net Zero Journey
Power markets serve as a catalyst for accelerating renewable generation capacity
addition in the country. Developed countries with well-developed Power markets have
adopted market-based models for efficient integration of renewables and providing
efficient price signals for newer capacity addition. Spot markets - including Day Ahead
Market, Green Market, Real Time Market, and market-based Ancillary Services - will serve
as enablers to the large scale RE capacity addition. Power markets consequently will play
a key role in managing the intermittencies of renewables by efficient integration with
conventional power, while reducing the cost of integration. Recognising the crucial role
of energy exchanges, the government aims to make changes to the way RE power developers
sell their power, by considering to allow them to sell green electricity on exchanges
instead of the mandatory PPA or PSA routes currently being used to sell the bulk of their
energy.
The market will encourage green generators to adopt new part-market and part-power
purchase agreement models, or pure market models, for future capacity addition. Payment
security offered by the market mechanism helps in addressing the issue of non-payment or
delayed dues faced by renewable energy developers. As per a joint study conducted by SECI
and IEX, through Deloitte, market based RE projects can command better IRR vis-?-vis RE
projects being set up through the existing bidding route. Market-based RE capacity will
also resolve issues such as delay in signing PPAs, schedule curtailment, and payment
delays. A gradual transition to market-based models will facilitate faster addition of RE
capacities to meet India's 2030 climate goals. IEX's Green Market, comprising Green
Day-Ahead, Green Term-Ahead, and Renewable Energy Certificate (REC) segments, is aligned
to India's sustainability aspirations. Going forward, new market models such as Virtual
PPAs and the CfD model can promote innovation, attract investment, and accelerate capacity
addition in the renewable sector.
Enabling a Vibrant Gas Market in India
Your company launched its first diversification initiative, the Indian Gas Exchange
(IGX), with an aim to create a robust gas market in India. IGX is India's first national
level gas exchange for physical delivery of natural gas, aligned with the government's
vision to double the share of natural gas in India's energy delighted to share that IGX
has grown exponentially, achieving several important milestones. Today, IGX commands about
15 percent market share of the natural gas spot market in the country. At IGX, more than
50 million MMBtu of gas has been traded in FY 2023. IGX currently offers delivery-based
trade at multiple delivery points, such as Dahej, Hazira, Ankot, Mhaskal, Bhadhbhut,
Dabhol, KG Basin, Gadimoga, Suvali. It covers six regional gas hubs across India - Western
Hub, Southern Hub, Eastern Hub, Central Hub, Northern Hub, and North-Eastern Hub.
IGX is playing a pivotal role in enabling India's transition to a gas-based economy by
benefiting gas producers, transporters, marketers, and consumers. The exchange offers the
assurance of payment security, increased penetration, flexibility in trade, and optimal
utilisation of infrastructure and investments through market-based signals.
It gives me great pleasure to bring to your attention that in December 2022, IGX
launched the Gas Index of India (GIXI), which is the first-ever nation-wide price index to
reflect the benchmark natural gas price for India. GIXI is developed to derive a single
price for the country, in line with international benchmarks. GIXI is calculated for
various hubs and delivery points with IGX prices being discovered based on actual
deliveries, making it reflective of the true market situation.
IGX continues to work relentlessly with the Ministry, Regulators, market participants
and other stakeholders to realise the nation's dream of building a sustainable energy
future through a vibrant gas market.
Business & Financial Performance
Your company traded 96.8 BU in the fiscal year 2023, across all segments. Despite a
challenging power supply scenario which reduced sell-side liquidity, IEX registered a
modest decline of 5 percent on YoY basis. During the year, IEX launched the Term Ahead
Market contracts with delivery up to 90 days, which enabled customers to hedge risk
against volatility in spot prices. Your company also launched Green Monthly contracts and
introduced Green Hydro contracts. IEX also commenced trade in the High Price Day Ahead
Market (HP-DAM), after it was launched by Shri RK Singh, Honourable Minister of Power and
New and
Renewable Energy, on 9th March ‘23. This segment will bring more capacity to the
spot markets during high demand months. IEX commenced Tertiary Reserve Ancillary Services
(TRAS) Market Segment from the delivery date of 1st June 2023 for Day Ahead Market
Ancillary Services and Real Time Market Ancillary Services.
The exchange market has been the fastest growing segment in the short-term electricity
market with a 20 percent CAGR growth over the last 5 years. In fiscal year 2023, it
constituted around 7 percent of India's total electricity consumption, as per data from
CERC Market Monitoring Reports. For the full fiscal year 2023, on a consolidated basis,
revenue declined by 2.1 percent on a YoY basis, from 484.4cr in FY 2022 to 474.1cr
in FY 2023. Consolidated PAT at 305.9 Cr de-grew 0.9 percent on YoY basis as compared to
308.6 Cr in FY22. For fiscal year 2023, the Board of the Directors of the Company
announced a final dividend of 1/- equivalent to 100 percent of the face value of equity
shares. During the year, the Board of Directors of the Company also approved the buyback
of equity shares from the open market route, amounting to 98 crores. With the
launch of new products, investment in technology and innovation, customer centric
initiatives, and an increase in country's power consumption, your company will maintain
its growth rate, while continuing to accentuate the country's energy sector value chain.
Technology and Customer Centricity
Technological innovation and customer-centricity are integral to the operations of your
company. We continue to leverage technology and innovation to launch market-friendly
products and increase efficiency of operations to facilitate the nation's energy
transition.
The agility and flexibility provided by our technology platform has enabled us to
launch multiple new contracts within just few days of getting the regulatory approval.
They include Any-day(s) Single-sided Reverse Auction contracts, Monthly contracts for
delivery up to 3 months, Weekly contracts for delivery up-to 12 weeks, Daily contracts for
delivery up-to 90 days, High Price Day Ahead Market segment, and DAM - RTM-Tertiary
Reserve Ancillary Services (TRAS) and the RTM-TRAS.
To provide a seamless and superior experience to our customers, we launched a web-based
platform called EnergX, which provides our customers with anytime anywhere; easy and
secure web-based bidding for all electricity segments; automated bidding through
Application Programming Interface (API); market data insights to enable effective bidding
decision; easy financial reconciliation for the transactions done on our platform; digital
client registration; web-based access to trade reports; and effective user access
management.
We have made continuous improvements to our software and hardware infrastructure to
ensure high availability, reliability, and security of our technology platform. The
exchange platform is built on a virtualised environment with hardware redundancy at the
machine level for high availability, and further redundancy built into the software. As
part of our robust Business Continuity Planning (BCP), we have implemented solutions to
enable us to have an automated and seamless switch of our entire exchange operations from
our Data Center (DC) to Disaster Recovery (DR). We have implemented best-in-class cyber
and data security solutions to ensure robust and secure operations through our platform.
Our 24x7 Security Operating Center (SOC) ensures risk free trading experience for our
customers. As India strides towards its carbon neutral journey, IEX will be at the
forefront of adopting new technologies andinnovations,toforgeaheadwithnewopportunities
presented by a sustainable energy future.
Social Connect
As a socially responsible corporate citizen committed to facilitate India's
decarbonisation targets, your company has voluntarily become carbon-neutral, making it
India's first power exchange to do so. This initiative will also enable our members and
clients to green up their value chain.
Your company remains steadfast in supporting inclusive and sustainable growth of the
nation. IEX consciously aims to positively impact the community across sections, in
various ways. During the year, we collaborated with the Sabhyata Foundation for promoting
and protecting India's culture, art, and heritage. Your company has supported the
foundation in its initiative of restoration, preservation, and promotion of national
culture and heritage at the Red Fort Monument which is designated as a UNESCO World
Heritage site.
Way Forward
India's GDP is projected to grow at a robust 7-8 percent per annum for the next few
years, which will propel electricity demand growth with the government's focus on
electrification and urbanisation. CEA's draft plan projects annual electricity demand to
grow at an average of 6 percent up to FY 2030. This will result in an annual increase in
power consumption of more than 100 BU. With the target to increase the share of Exchanges
to 25 percent of electricity consumption and a consistent decline in long-term PPAs being
signed, a significant volume of this incremental demand is likely to come to power
exchanges. At IEX, we will continue to develop innovative products and market segments
that provide greater choice to consumers, while deepening the existing product offerings.
Deepening of Term Ahead Market contracts from 90 days up to one year will benefit discoms
to better optimise their procurement by trading on exchanges. Your company pioneered Cross
Border Electricity Trade (CBET) on the exchange platform, with the aim to build a regional
power market. As other neighbouring countries begin to participate in CBET, a South Asian
power market will emerge which will allow for a price discovery that will be unique for
the region. A report on BIMSTEC Energy Outlook 2035 estimates CBET potential in the region
to increase up to 7 times, from 16 BU in 2020, to 127 BU. This will enlarge CBET volumes
at IEX.
Further, on the input side, the supply side scenario has been consistently improving
with an enhanced coal supply, reduction in e-auction coal prices, and declining imported
coal and gas prices. This will result in further sell side liquidity and price correction
on the exchange and provide more efficient optimisation opportunities and higher clearance
for discoms and open access consumers.
In line with its Long-Term Low Emission Development Strategy at the COP27, India is
committed to judiciously utilise its national resources in order to attain energy
security. Power exchanges will act as key enablers in this endeavour by proliferating
renewable capacity addition and integration.
The government's thrust on green hydrogen and green energy banking solutions, such as
pumped storage, battery, hydrogen etc., will lead to new products and markets. Your
company is well positioned to leverage these opportunities and will explore the synergies
for effective growth and diversification prospects.
The proposal to mandate RE participation in the market and introduction of the CfD
mechanism, will bring additional capacity to the exchanges. At IEX, we are also exploring
the CfD model beyond RE, to bring costlier power, such as gas, imported coal, peak power,
on the exchange platform. In an effort to leverage the emphasis on accelerating rooftop
solar (RTS) capacity addition, your company has partnered with ISGF and Power Ledger to
jointly explore opportunities in P2P trading in India. P2P shall play a supporting role
towards creating incentives for prosumers to add more RTS capacities. IEX, along with ISGF
and Power Ledger, shall jointly conduct various pilot projects and evaluate potential
opportunities. Constitution of the National Steering Committee for the Indian carbon
market will help develop the carbon credits trading market in the country. Exchanges have
immense potential to expand into adjacencies like the carbon market, which can channelise
climate finance towards credible sustainable projects by sending market signals to
investors and corporates. Your company has the first-mover advantage in this sector,
through its wholly owned subsidiary ‘International Carbon Exchange'. We are also
exploring adjacencies within the carbon space, such as venturing into advisory and
technology-based solutions, to leverage on the huge potential of this market.
Technology-driven solutions leveraging futuristic technologies such as API-based solutions
and Robotic Process Automation, will automate market operation processes for greater
efficiency. Your company will continue to assess and leverage new opportunities in its
core business as well as in the adjacencies, to deliver the highest value to its
stakeholders and the nation at large. IEX remains committed to introducing futuristic
products that will catalyse the nation's march towards energy security and sustainability.
Your company's strong governance structure, ethics and business fundamentals will continue
to drive the country's vision for economic and energy transition. IEX will collaborate
with all stakeholders, including policymakers, regulators, system operators, market
participants, members, clients, and partners, to develop the country's energy market and
foray into new growth opportunities that maximise stakeholder value.
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