Strengthening Adoption of Electricity Markets to Enable the Clean Energy Transition in Indian States

This research paper examines the adoption of electricity markets in Indian states to facilitate the clean energy transition. It finds that while real-time markets are growing, overall market penetration remains low (7% of demand) due to inflexible long-term power purchase agreements (PPAs), unpredictable pricing, and poor forecasting. The paper highlights that states like Gujarat and Tamil Nadu could achieve significant cost savings by shifting toward day-ahead markets and recommends PPA renegotiation, the introduction of ancillary services, and coordinated resource adequacy planning.

• Electricity market participation in India is currently low, with power exchange (PX) instruments accounting for only 7 percent of the country's electricity demand. The Indian Energy Exchange (IEX) is the dominant entity, handling 90–94 percent of all PX transactions.
• Real-time markets (RTMs) have seen significant growth since their June 2020 introduction, now representing 25 percent of PX transactions. Conversely, the share of day-ahead markets (DAMs) in the PX space decreased from 75 percent to 50 percent over the same period.
• States with high coal capacity, specifically Chhattisgarh, Jharkhand, and West Bengal, utilize DAMs and RTMs to sell power, with some regions selling 11–26 percent of their demand through DAMs in FY2023 to improve thermal plant utilization.
• RE-rich states like Maharashtra, Gujarat, and Tamil Nadu use RTMs to sell power during peak wind generation, helping to manage intermittency and integrate more renewable energy into the grid.
• Significant cost savings are possible for states using DAMs over long-term power purchase agreements (PPAs). In FY2023, Gujarat and Tamil Nadu showed the highest potential savings, at INR 0.28 and INR 0.17 per kilowatt-hour respectively.
• Major barriers to market adoption include the unpredictability of market clearing prices (MCPs), inaccurate supply-demand forecasts, a perceived bias toward sellers, and the fact that most capacity is locked in inflexible long-term PPAs.
• Long-term PPAs are often inflexible due to 'take-or-pay' clauses, which force buyers to pay fixed costs regardless of use, and the right of DISCOMs to revise schedules shortly before delivery, which limits generator participation in exchanges.
• The paper recommends re-evaluating PPA structures, introducing demand-side bidding and ancillary services, and establishing independent market monitoring mechanisms to prevent manipulation and ensure transparency.
• To improve resource adequacy and reduce system costs, the paper suggests coordinated planning between national and state agencies and the potential introduction of capacity markets and contracts for differences (CFDs).

APA

Sundararagavan, S., Anirudh, S., Chen, J., Gupta, G., & Palani, H. (2024). Strengthening Adoption of Electricity Markets to Enable the Clean Energy Transition in Indian States. World Resources Institute. https://files.wri.org/d8/s3fs-public/2024-01/strengthening-adoption-electricity-markets-clean-energy-india.pdf?VersionId=GZGiMfsNWmuN0rPCVhnQ82aalAxUWS5Y

Chicago

Sundararagavan, Sandhya, Sripathi Anirudh, Jennifer Chen, Geetika Gupta, and Harish Palani. Strengthening Adoption of Electricity Markets to Enable the Clean Energy Transition in Indian States. World Resources Institute, 2024. https://files.wri.org/d8/s3fs-public/2024-01/strengthening-adoption-electricity-markets-clean-energy-india.pdf?VersionId=GZGiMfsNWmuN0rPCVhnQ82aalAxUWS5Y.

Wikipedia

{{cite report |last1=Sundararagavan |first1=Sandhya |last2=Anirudh |first2=Sripathi |last3=Chen |first3=Jennifer |last4=Gupta |first4=Geetika |last5=Palani |first5=Harish |title=Strengthening Adoption of Electricity Markets to Enable the Clean Energy Transition in Indian States |publisher=World Resources Institute |date=January 2024 |url=https://files.wri.org/d8/s3fs-public/2024-01/strengthening-adoption-electricity-markets-clean-energy-india.pdf?VersionId=GZGiMfsNWmuN0rPCVhnQ82aalAxUWS5Y |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sundararagavan2024strengthening, author = {Sundararagavan, Sandhya and Anirudh, Sripathi and Chen, Jennifer and Gupta, Geetika and Palani, Harish}, title = {{Strengthening Adoption of Electricity Markets to Enable the Clean Energy Transition in Indian States}}, institution = {World Resources Institute}, year = {2024}, month = jan, url = {https://files.wri.org/d8/s3fs-public/2024-01/strengthening-adoption-electricity-markets-clean-energy-india.pdf?VersionId=GZGiMfsNWmuN0rPCVhnQ82aalAxUWS5Y}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }