Demand Response In Power Markets

India’s power sector is characterised by long term power procurement contracts between generators which offered very less flexibility. The long-term contracts, constituting 90% of the share of power procurement portfolio of the electricity distribution companies (DISCOMs) are entered through Power Purchase Agreements (PPAs) for a duration of up to 25 years. Currently, the country is transitioning into short-term contracts, and a real-time market providing much-needed flexibility. Recently, the government has permitted trading of derivatives in the power market, allowing futures contracts and the ability to use it as a new hedging tool to mitigate price volatility and risks.