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

The document analyzes the current state of electricity markets in India, noting that while power exchanges (PX) are growing, they only account for 7% of total demand. It identifies key barriers to market adoption, including the dominance of inflexible long-term power purchase agreements (PPAs), unpredictable market clearing prices, and inaccurate supply-demand forecasting. The paper highlights that states like Gujarat and Tamil Nadu could achieve significant fuel cost savings by shifting from PPAs to day-ahead markets (DAMs). It recommends redesigning PPA structures, introducing contracts for differences (CFDs), strengthening institutional market monitoring, and developing state-level resource adequacy frameworks to better integrate variable renewable energy.

• Power exchange (PX) instruments currently represent a small fraction of India's electricity demand, with the Indian Energy Exchange (IEX) maintaining a near-monopoly by handling 90–94 percent of these transactions.
• Real-time markets (RTMs) have seen significant growth since June 2020, now accounting for 25 percent of PX transactions, while the share of day-ahead markets (DAMs) decreased from 75 percent to 50 percent in the same period.
• States with high coal capacity, such as West Bengal, Jharkhand, and Chhattisgarh, use DAMs and RTMs to sell power (11–26 percent of demand in FY2023), which improves the plant load factor of their thermal plants.
• Renewable energy-rich states, specifically Maharashtra, Gujarat, and Tamil Nadu, utilize RTMs to sell power during peak wind generation, helping to manage intermittency and integrate more RE into the grid.
• Significant fuel cost savings are possible for states that shift procurement from long-term PPAs to DAMs; for FY2023, Gujarat had an annual savings potential of INR 2,964 crores (INR 0.28/kWh) and Tamil Nadu had INR 1,560 crores (INR 0.17/kWh).
• The primary barriers to market adoption include the unpredictability of market clearing prices (MCPs), a perceived seller bias, the lack of independent market monitoring agencies, and the fact that 86 percent of thermal and 95 percent of RE capacity are locked in long-term PPAs.
• Inaccurate short-term forecasting for renewable energy and net load prevents states from utilizing RTMs and G-DAMs, often forcing a reliance on expensive fossil-fuel PPAs and risking stranded thermal capacities.
• Long-term PPAs are often too inflexible due to 'take-or-pay' clauses and the right to revise schedules, which prevent generators from optimally participating in day-ahead exchanges.

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} }