The National Stock Exchange (NSE) has announced that its electricity futures are increasingly becoming a key price benchmark in India's power market. Launched on July 14, 2025, the electricity futures contracts have quickly gained traction, providing a new tool for managing electricity price risk and enhancing market liquidity.
These futures are standardized, cash-settled derivative contracts that enable participants to lock in electricity prices for a specific month in the future. Instead of physical delivery of power, these contracts are settled financially based on benchmark electricity prices, primarily the Day-Ahead Market (DAM) prices published by the Power Exchange of India Ltd (PXIL) and other approved exchanges. Each contract represents 50 megawatt hours (MWh) of base load electricity for a full month, aligning with India’s vision of ‘One Nation, One Grid, One Price’.
According to the NSE, the design of these contracts ensures a unified benchmark price, reflecting a volume-weighted average across all three power exchanges, including hydro, thermal, and green energy sources. Margins are maintained at around 10%, balancing risk and liquidity for participants.
One example of the alignment between futures and spot prices occurred on October 31, when Damodar Valley Corporation's auction discovered a price of ₹3.23 per unit, precisely matching the NSE November futures price that day. This alignment demonstrates that the physical power market is treating NSE futures prices as benchmarks, validating the product design and price integrity.
Since the launch, the NSE has recorded 3.16 lakh lots traded, equivalent to 15.98 billion power units. In just three months, the daily electricity futures volume nearly matched spot market activity. The NSE holds nearly 80% market share in electricity futures.
Industrial customers are crucial to the next phase of growth, as any company or unit with a 70 kW base load, from malls to factories, can efficiently hedge its power costs. To encourage participation, the NSE is conducting awareness programs and offering a free Electricity Derivatives Certification for industry participants.
The NSE plans to expand electricity derivatives into quarterly and yearly contracts, and later into Contracts for Difference (CFDs) for renewable energy. These new products align with India's net-zero transition goals.
These contracts operate alongside the physical electricity market, providing a complementary financial instrument rather than being part of the physical trading or delivery process. The product is designed to enable efficient hedging and risk management in electricity markets, helping participants manage exposure to price volatility. Final settlement price is determined by the volume-weighted average of DAM prices from PXIL and other approved exchanges over the contract month. All contracts are cash-settled, making participation simple for both hedgers and speculators.
