New Delhi, June 12 -- The National Stock Exchange (NSE) and the Multi-Commodity Exchange (MCX) recently secured approvals from the equity market regulator to launch electricity derivatives. Not only would this minimise financial uncertainty for power distribution companies but they can also use electricity derivatives or futures contracts to lock in electricity prices in advance. Mint takes a look at what this means and why there is a sudden interest in electricity derivatives.

Electricity derivatives are financial contracts that help power companies and other electricity buyers protect themselves from sudden price changes in the electricity market. Think of it like this: electricity prices can rise or fall sharply due to factors like de...