CERC Directs Phased Implementation Of Market Coupling In Power Exchanges Starting January 2026

The Central Electricity Regulatory Commission (CERC) has issued a new order on July 23, 2025, in the Petition to direct the phased implementation of market coupling in India’s power sector. This directive builds upon the earlier order issued on February 6, 2024, which had initiated a shadow pilot for power system and cost optimization through market coupling. The initiative aims to improve electricity scheduling and dispatch efficiency by integrating the Real-Time Market (RTM), Day-Ahead Market (DAM), and Security Constrained Economic Dispatch (SCED) across power exchanges.

The earlier shadow pilot directed Grid-India to develop software for market coupling and run pilot operations involving (a) RTM coupling across three power exchanges, (b) RTM-SCED coupling, and (c) DAM coupling. These pilot runs were conducted over four months from December 1, 2024, to March 31, 2025. Grid-India submitted its feedback report on June 30, 2025, detailing the operational performance and outcomes of the pilot.

Key results from the pilot include an overall welfare increase of ₹38 crore (0.3%) and a cleared volume rise of 52 million units (MU) (0.2%) in DAM coupling. RTM coupling showed a ₹72 lakh (0.01%) increase in welfare and 1.54 MU (0.01%) increase in volume. For RTM-SCED coupling, the net savings improved by ₹1.4 crore per day, although there was a ₹1/MWh increase in average cost due to reduced demand catered. Importantly, price volatility also reduced in the coupled RTM-SCED scenario.

The Commission acknowledged the efforts of Grid-India and the Committee formed on April 19, 2024, to deliberate technical, procedural, and software development aspects of the pilot. The Committee held five meetings and oversaw the design of an in-house coupling engine, tested with historical data covering 29 months. Challenges identified include lack of harmonization in bid structures and clearing algorithms among exchanges, for which regulatory intervention is suggested.

Based on these findings and as per Regulations 37 to 39 of the CERC Power Market Regulations 2021, the Commission has now decided to begin phased implementation of market coupling. The first phase will see the coupling of the Day-Ahead Market (DAM) by January 2026. This will be managed in a round-robin manner where each power exchange will act as the Market Coupling Operator (MCO) in rotation, with Grid-India as a fourth MCO for backup and audit.

The second phase involving RTM coupling will be considered later, after operational experience is gathered from DAM coupling. The coupling of RTM with SCED, although found beneficial, presents several complexities and requires further regulatory review and stakeholder consultation. The Commission has also asked Grid-India to develop software and conduct a three-month shadow pilot for Term-Ahead Market (TAM) coupling, including contingency contracts, and submit its feedback.

All power exchanges are directed to cooperate fully by sharing data and assisting in implementation. CERC will issue further directions based on progress updates and consultation outcomes.

This order represents a significant step in power market reform, intended to boost transparency, efficiency, and fairness in price discovery while optimally utilizing available transmission infrastructure across India.