The Central Electricity Regulatory Commission (CERC) plans to implement market coupling in the Day Ahead Market (DAM) of power exchanges from January 2026. However, industry experts and analysts question its benefits. They argue that the pilot study by Grid Controller of India (Grid-India) shows marginal gains that do not justify full-scale implementation. Concerns include added complexity, delayed market operations, and unclear consumer savings.
Recent Developments and Pilot Study Findings
A shadow pilot study by Grid-India in July 2025 revealed minimal improvements from market coupling. In the DAM segment, overall welfare increased by just 0.3% and volume cleared rose by 0.2%. The Real-Time Market (RTM) showed an even smaller welfare gain of 0.01%. These results align with an earlier CERC order from February 2024. The reported ₹38 crore increase in social welfare is theoretical and does not translate into direct consumer savings.
Market Coupling versus Exchange Coupling
While the initiative is termed “market coupling,” industry officials say the proposal resembles “exchange coupling,” a concept with no global precedent. Exchange coupling implies merging separate exchanges, which may reduce competition. Critics warn this could stifle innovation and reduce incentives for new products in the power market.
Challenges in Implementation
Implementing market coupling requires upgrades. These include software integration, infrastructure modifications, data sharing protocols, and consensus on financial settlements. Experts believe the January 2026 deadline is unrealistic and suggest implementation may only be feasible by December 2027. Delays could affect market efficiency and stakeholder confidence.
Impact on Market Liquidity and Investor Confidence
Market coupling does not address key challenges like improving market liquidity or deepening participation. Industry officials argue that it may duplicate functions and add complexity without solving core issues. Investor confidence and transparency could be affected if the complete Grid-India report is not made public for independent review.
Economic and Regulatory Perspectives
According to JM Financial, benefits such as price improvement, volume increase, and transmission efficiency are negligible. The report marks that unconstrained cleared volume was already high at 99.9% in FY24, leaving little room for gains. Regulatory clarity and stakeholder consensus are essential before pursuing large-scale changes in power market operations.
Global Comparisons and Market Dynamics
The proposed model contrasts with global market coupling examples, which typically enhance competition and efficiency. Critics liken the proposal to merging competitive platforms like NSE and BSE or telecom giants Jio and Airtel, which could harm open market principles. Maintaining competition and innovation is vital for a healthy power sector.
Transparency and Stakeholder Engagement
Industry experts call for full disclosure of the Grid-India pilot report. Transparency would enable informed debate and independent assessments. Stakeholder confidence depends on clear communication and evidence-based policy decisions. Without this, market reforms risk resistance and limited effectiveness.
Questions for UPSC:
- Critically discuss the role of regulatory commissions like the Central Electricity Regulatory Commission in shaping India’s energy markets with examples.
- Analyse the impact of market integration and coupling mechanisms on competition and innovation in power sectors globally.
- Examine the challenges of implementing large-scale technological reforms in India’s infrastructure sectors and suggest measures to overcome them.
- Discuss in the light of India’s energy transition, how market design can influence investor confidence and market liquidity in renewable energy trading platforms.
