Electricity futures on NSE set to bring down volatility in prices

Will boost market participation, say stakeholders

- ARUNIMA BHARADWAJ

The launch of electricity futures on the NSE could play a crucial role in reducing price volatility by enabling stakeholders to take financial positions, industry players believe.

The NSE recently announced the launch of electricity futures, effective July 11, 2025, to encourage active participation and support market development.

The electricity futures contract will enable power buyers, sellers, traders, industrial users, and retailers to manage price risks.

Electricity is an essential commodity, yet its prices can be highly volatile, ranging from less than ₹2-3/kWh to ₹8-10/kWh within a single 24-hour cycle, given the continuous rise in power demand.

"For instance, a distribution company (discom) with surplus daytime power, when prices are typically below ₹3/kWh, could purchase an equivalent amount of derivatives. A financial investor would be willing to pay a higher price for these derivatives, as they would have the option to offset their position during the night when prices are higher (typically between ₹6-10/kWh).

Similarly, when squaring off their position at night, they would be willing to close it at a slightly lower price. Ultimately, as electricity future markets deepen, they will impact physical prices, leading to reduced volatility in the sector," said Aditya Malpani, senior director & regional business head-West, AMPIN Energy Transition.