NSE to launch a monthly electricity futures contract

The National Stock Exchange (NSE) is expected to launch a cash-settled monthly electricity futures contract, according to a senior executive at India’s largest bourse.

The date of launch of the monthly electricity contract will be announced in the next two-three weeks, said Harish Ahuja, head of sustainability, power/carbon, markets, listing at NSE, on Wednesday.

NSE received the approval from the market regulator on 11 June to launch electricity derivatives. These financial contracts help power companies and other electricity buyers protect themselves from sudden price changes.

The monthly contract will be available for all 12 months of the year, said Ahuja in a media roundtable. It will commence on the first business day of every month and expire a day before the contract ends.

The lot size of the one-month electricity futures contract will be 50 MWh, which is equivalent to 50,000 units of electricity in one contract. The contract is cash-settled, meaning if the spot price rises above the futures price, the buyer earns the difference.

The price will be decided by taking the 30-day weighted average spot price of the three energy exchanges—Indian Energy Exchange Ltd, Hindustan Power Exchange Ltd and HPL Electric and Power Ltd.

The participants could be power generators, distributors, traders, high-net-worth individuals and retail participants such as malls, hotels and corporates.

Ahuja said the electricity futures contract will not end up becoming a speculative place like equity derivative instruments as, globally, the power derivative market is around three times the spot market. In the case of equities, derivatives are almost 100x the size of the cash market.

After the monthly electricity futures contract, NSE plans to launch quarterly and annual contracts as well.

Electricity futures can help discoms hedge against electricity price spikes during high-demand seasons like summer or festival periods. It can help power generators secure merchant revenue and allow traders to take speculative or hedged positions.

India is the world’s third-largest power producer, with 1,900 billion units generated in 2025. “Considering the global derivatives and their respective countries' generation benchmarks, India has the potential derivative market size of around 8,000 billion units,” said an NSE presentation.