Skip to main content

Finessing India's power market design to be more competitive

September 03, 2021
Kashish Shah
Document

Key Findings

The Government of India’s plan to commission 450 gigawatts (GW) of renewable energy capacity by 2030 has set the country’s power market on a transitionary path.

Ultra-low-cost renewables have already been extremely disruptive for the Indian power market. Whilst the expensive and emission-intensive coal-fired power generation assets have been affected most by the disruption, some has also trickled down to India’s power distribution sector.

Executive Summary

The response to this challenge by the discoms has been regressive to a large extent in our view. Discoms have cancelled auctions that resulted in already low-cost renewables to strike deals at even lower prices. In some cases, PPAs have been cancelled or forced to be negotiated to bring tariffs lower than the signed PPAs. This has significantly derailed India’s near-term target of 175GW of renewable energy capacity by FY2021/22; the renewables capacity stood at about 100GW as of July 2021.

India’s state-owned power distribution sector has been a troubled segment of India’s power sector value chain for more than a decade now. The key reasons behind discoms’ ailing financial health have included high technical and commercial losses; high power procurement costs; state-imposed crosssubsidy burdens on tariffs; and other operational inefficiencies. Identifying all of these weaknesses in discoms’ operational and financial structure in our report ‘The Curious Case of India’s Discoms’ from August 2020,1 IEEFA had recommended a national pooling of electricity market resources for optimising India’s power generation resources.

Kashish Shah

Kashish Shah is an energy finance analyst with the Institute for Energy Economics & Financial Analysis (IEEFA). He specialises in financing, policy and technology matters of the Indian electricity market.

Kashish has a master’s degree in Economics from the University of Sydney and an Electronics Engineering degree from NMIMS University in Mumbai.

Go to Profile

Latest Research

See all Research >

Join our newsletter

Keep up to date with all the latest from IEEFA