India’s renewable energy transition

Source: IE

Subject: Renewable energy

Context: India’s energy transition debate has shifted from capacity creation to system reform, as renewable generation now outpaces the grid’s ability to efficiently absorb and utilise it.

About India’s renewable energy transition:

What it is?

• India’s renewable energy transition refers to the shift from fossil-fuel–dominated power generation to a low-carbon system driven by solar, wind, hydro, and storage, supported by reforms in grids, tariffs, and electricity markets to ensure reliability and affordability.

Trends:

• Rapid capacity expansion: India’s installed solar and wind capacity has crossed 180 GW, making renewables among the cheapest sources of new power generation.
• Cost competitiveness: Solar and wind tariffs in India are now lower than new coal-based power, strengthening the economic case for clean energy.
• Smart grid foundations: Around 49 million smart meters have been installed nationwide, enabling time-of-day tariffs and demand-side management.
• Demand concentration vs resource location: Renewable resources are concentrated in western and southern states, while demand is highest in urban and industrial clusters elsewhere.

Current Indian status:

• Time-of-Day tariffs: States have mandated differential pricing for peak and off-peak hours to signal real system costs, supported by rapid smart-meter rollout, though behavioural response remains limited.
• Renewable curtailment: Despite sufficient solar and wind capacity, green power is frequently curtailed due to grid congestion, forecasting gaps, and rigid contract-based scheduling.
• Limited role of power exchanges: Only about 7–9% of electricity is traded on exchanges, restricting nationwide optimisation as most power remains locked into long-term PPAs.
• DISCOM reforms with lingering stress: Schemes like UDAY and RDSS improved infrastructure and metering, but weak revenue recovery continues to strain DISCOM finances.

Challenges associated:

• DISCOM financial stress: AT&C losses hover around 16%, while tariff under-recovery persists, limiting the ability of DISCOMs to invest in modern grids and flexibility solutions.
• Misaligned tariff design: Volumetric tariffs fail to recover fixed network costs, making efficiency gains and rooftop solar appear as revenue losses rather than system benefits.
• Cross-subsidy dependence: High-tariff industrial and commercial consumers cross-subsidise households and agriculture; their shift to open access or captive power destabilises DISCOM revenue bases.
• Limited demand flexibility: Time-varying tariffs alone cannot shift load at scale because most consumers lack automation, real-time information, and coordinated response mechanisms.
• Fragmented wholesale markets: Self-scheduling under long-term PPAs prevents least-cost dispatch of renewables across regions, leading to inefficiencies and higher system costs.

Way ahead:

• Prioritise distribution reform: Redesign incentives so DISCOMs earn returns for reliability, loss reduction, and system efficiency, not just electricity sales volume.
• Dynamic tariffs with automation: Combine time-of-day pricing with smart appliances, EV charging control, and automated demand response to manage peaks cost-effectively.
• Nationwide MBED: Implement market-based economic dispatch to ensure cheapest power is used first, with CERC estimating savings of about billion annually.
• Integrate captive power plants: Bringing captive generation into markets would increase liquidity, flexibility, and competition, lowering overall system costs.
• Redefine the DISCOM role: Shift DISCOMs from passive intermediaries to active system optimisers, managing demand, flexibility, and grid reliability in a renewable-heavy system.

Conclusion:

India’s energy transition now depends less on adding renewables and more on running the power system intelligently. Without distribution and market reforms, green power will remain underused despite surplus capacity. A grid that rewards efficiency, flexibility, and coordination will decide whether renewables become India’s advantage or its constraint.