IEX share Hits new 52 week Low -Understanding the Energy Exchange's Recent Rout

 

Stock price of the Indian Energy exchange (IEX) hit lower circuit back-to-back in 2 sessions, fell more than 20 % in two trading days. It has been a nightmare for retail investors in recent times.

From its All-time high (ATH) of 318.65 touched a new low of 116 today, trading at 64 % discount.

The energy exchange, IEX, has been experiencing a sharp decline in its stock value over the past couple of sessions. This has been due to a directive that was released by the Ministry of Power on June 2. The directive instructed the Central Electricity Regulatory Commission (CERC) to begin the process of consultation and implementation of ‘market coupling’. In this article, we will explore what market coupling is and how it affects IEX.

What is Market Coupling?

Market coupling is the process of linking two or more electricity markets. It involves integrating pricing and dispatching mechanisms to enable buyers and sellers to access multiple markets at the same time. The goal of market coupling is to optimize the use of available capacity and reduce energy costs for consumers.

How Does Market Coupling Affect IEX?

IEX has been opposing market coupling because it believes that it could negatively impact the company’s business. The energy exchange is concerned that market coupling will lead to reduced demand for electricity contracts on its platform. This would impact IEX’s revenues and profitability, as it earns a commission on every electricity contract traded on its platform.

 

The introduction of a market coupler can help reduce energy cost for consumers. When markets are linked, Energy can be purchased from the most cost-effective source at any point of time.

At present, IEX enjoys dominance in the electricity spot price determination market in India and is the most trusted platform for it.

However, with the arrival of market coupling mechanism competition for IEX is likely to increase as more energy exchanges will enter the market which will be a threat to its market share dominance which IEX currently enjoy.

Indian Energy Exchange enjoys almost a 100% market share in the RTM and DAM segments, contributing to nearly 75-80% of the exchange volumes, as reports suggest.