Power markets would drive India's green energy transition with new market model

India's power exchanges are set to revolutionise renewable energy integrationwith innovative market models and storage solutions.

For over the last 16 years, power markets have enabled efficient and competitive price discovery in India's power sector. As India advances on its path to becoming a Net Zero emitter by 2070, power markets are poised to play an instrumental role in enabling a sustainable and energy-efficient future. A significant part of this role rests on the evolving energy mix, which aims for over 5o% renewable capacity by 2030-an estimated 500 GW of renewable energy (RE) capacity. The large-scale addition of RE will also require efficient integration with the power system to ensure reliable grid operations.

Evidence from Europe suggests that large-scale renewable capacity can be effectively integrated through power markets. In terms of energy transition, India bears considerable similarity to the European energy market of a decade ago. Between 2000 and 2010, spot market penetration in the UK was approximately 10%, while the share of RE in total consumption was around 20%. India is currently at a similar stage.Since 2010, RE and spot market penetration have accelerated, and today, European countries trade 40% of their generation through power exchanges, with renewables accounting for 40% of the generation.

Regulatory Support
Given their benefits, power exchanges have received consistent encouragement from the government and regulatory bodies. While the draft National Electricity Policy envisions a larger role for power exchanges in India's power generation, an expert group constituted by the Ministry of Power for the Development of the Electricity Market in India has outlined a roadmap for the sector. This group has drawn insights from market models in countries such as the Uk, the US, and Germany, which successfully increased their respective RE penetration to over 30% through market-based reforms.

Additionally, the implementation of the General Network Access (GNA) in October 2023 has simplified the levy and collection of Inter-State Transmission System (ISTS) charges and losses for generators and discoms, further encouraging market participation. As per the trajectory defined by the Ministry of Power and adopted by State Electricity Regulatory Commissions (SERCs), obligated entities are mandated to procure a predefined portion of their total electricity consumption from renewable sources-around 30% for FY25.

Green Energy Open Access is also available, with the threshold limit for green open access reduced from one megawatt to 1oo kilowatts. This development enables small and medium enterprises in the Commercial and Industrial (C&l) sector to participate in exchanges and benefit from competitive pricing. Similarly, draft procedures for the Trading of Carbon Credit Certificates, published by the Central Electricity Regulatory Commission (CERC), allow for carbon credit trading through power exchanges.