"The Rising Role of Renewable Energy in India's Power Sector and the Impact on Trading Volumes"

Guy Spier

Hatched by Guy Spier

Feb 17, 2024

3 min read


"The Rising Role of Renewable Energy in India's Power Sector and the Impact on Trading Volumes"


As India focuses on its energy transition and aims for decarbonization and net zero targets, the share of renewable energy in the country's power generation is rapidly increasing. This shift towards renewable energy sources is not only driven by environmental concerns but also by the growing demand from industrial and commercial consumers. To facilitate the integration of renewable energy into the grid, the energy markets in India are evolving, leading to the emergence of innovative products and an increase in short-term trading volumes.

The Growing Share of Renewable Energy in India's Power Generation:

India's power sector is witnessing a significant transformation, with renewable energy sources playing a crucial role. The country has set ambitious targets for renewable energy capacity addition, aiming to achieve 450 GW by 2030. As a result, the share of renewable energy in India's power generation is on the rise. This shift is driven by the government's policies and incentives, as well as the increasing affordability and efficiency of renewable technologies.

Evolution of Energy Markets to Facilitate Renewable Energy Adoption:

To support the increased adoption of renewable energy, energy markets in India are undergoing changes. These changes include the introduction of innovative products such as the green term-ahead market (GTAM), the green day-ahead market (GDAM), the real-time market (RTM), and market-based ancillary services. These products offer flexibility and enable better integration of renewable energy into the grid.

Impact on Short-Term Trading Volumes:

One of the significant indicators of the changing dynamics in the power sector is the growth of short-term trading volumes. During 2022-23, short-term trading volumes reached 194.35 billion units (BUs), marking a 4.1% increase from the previous year. These volumes accounted for 13.7% of the total power generation during the same period. The compound annual growth rate (CAGR) of short-term trading volumes between 2017-18 and 2022-23 was 8.8%, surpassing the CAGR of power generation at 1.7%. Power exchanges played a crucial role, accounting for approximately 53% of the total transaction volume, while trading licensees, deviation settlement mechanism transactions, and bilateral transactions between discoms made up the remaining portion.

The Benefits of Increased Short-Term Trading Volumes:

The rise in short-term trading volumes in India's power sector brings several benefits. Firstly, it enables better utilization of renewable energy resources by providing a platform for surplus power to be traded. This helps in reducing curtailment and maximizing the use of clean energy. Secondly, it enhances market efficiency by promoting competition and price discovery. Short-term trading allows market players to respond quickly to changing supply and demand conditions, leading to optimal utilization of resources. Lastly, it encourages investment in renewable energy projects by providing a reliable and efficient market for off-take agreements.

Actionable Advice for Stakeholders:

  • 1. Industrial and Commercial Consumers: Take advantage of the evolving energy markets in India by actively exploring opportunities to shift towards renewable energy sources. Engage with power exchanges and other market participants to understand the potential benefits and risks of short-term trading.
  • 2. Renewable Energy Developers: Focus on developing and implementing innovative solutions that can enhance the integration of renewable energy into the grid. Collaborate with power exchanges and market participants to leverage the growing short-term trading volumes for off-take agreements.
  • 3. Government and Regulatory Bodies: Continue to support the growth of renewable energy in India's power sector by creating a conducive policy and regulatory environment. Foster collaboration between market participants and ensure the development of robust market infrastructure to facilitate increased short-term trading volumes.


India's power sector is undergoing a significant transformation, driven by the increasing share of renewable energy and the evolution of energy markets. The rise in short-term trading volumes is a testament to the growing adoption of renewable energy sources and the benefits they bring. As India continues its energy transition journey, stakeholders must actively participate in the evolving energy markets, leverage the opportunities presented by short-term trading, and collaborate to achieve a more sustainable and efficient power sector.

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