- Exchange-traded power volumes are soaring, driven by a CAGR of 16%.
- Producers shift from “cost-plus” PPAs to “discount-to-index” models, pricing long-term contracted power below exchange rates.
DELHI, INDIA (AURORA ENERGY RESEARCH)—India’s energy market is witnessing a transformative shift, with power increasingly being traded on exchanges instead of through traditional bilateral long-term contracts. Aurora Energy Research’s inaugural public webinar in India highlighted that merchant (exchange-traded) power volumes have soared from 24 TWh in 2012/13 to 121 TWh in 2023/24, marking an impressive compounded annual growth rate (CAGR) of 16%.
This shift is set against the backdrop of India’s rapidly growing power demand, projected to nearly double by 2035 according to Aurora, reaching 3,100 TWh from today’s 1,667 TWh.
Driving this growth in merchant volumes is the Indian government’s push for renewable energy, with policies requiring developers to deliver specific power shape to improve the utilisation of the transmission network, which requires oversizing of renewable assets, bolstering volumes traded on exchanges.
A key consequence of oversized solar assets selling power in the merchant market is depressed power prices in the solar hours, which present a risk to assets producing on a merchant basis in these hours, Aurora assesses. Beyond this, the volumes traded on exchanges represents a growing share of a growing pie and will effectively become the index on which long-term contracts are priced. As a result, even market participants seeking PPAs would need to understand the merchant market—shifting from “cost-plus” PPAs to “discount-to-index,” pricing long-term contracts below exchange rates.
Debabrata Ghosh, Head of India, Aurora Energy Research, says:
“Merchant power is expected to constitute 25% of the Indian power market by 2030-2032. Power market reforms and evolution of power contracts are key drivers. This requires market participants to develop deep, granular analytical capabilities to optimise portfolios and financing as well as capture arbitrage opportunities.”
Ashutosh Padelkar, Research Lead, India, Aurora Energy Research, says:
“Demand for electricity in India has grown by 70% over the last ten years due to economic growth, and over the same timeframe, merchant volumes have grown by a factor of four. By 2035, the total demand in India could double, relative to today’s levels, with an increasingly larger share of the power being traded in merchant markets. Aurora has witnessed this trend in western Europe in the 2000s that as liberalisation drives an increase in exchange traded volumes, PPA pricing transforms from a “cost-plus” model to using the market prices as reference.”
Aurora Energy Research, the global leader in power market analytics, is now accelerating its global expansion by launching a new office in Delhi, India. This marks a significant step in the company’s strategy to tap into the rapidly growing Indian energy market. With India emerging as a key player in the global energy transition, Aurora’s expansion is poised to support both local and international stakeholders in navigating the complexities of the region’s energy market.
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Established in 2013, Aurora Energy Research is a leading global provider of power market forecasting and analytics for critical investment and financing decisions. Headquartered in Oxford, we operate out of 15 offices worldwide covering Europe, North & South America, Asia, and Australia. Our comprehensive services include market outlook packages for energy industry participants, advisory support, and innovative software solutions. We foster diversity with a team of over 800 experts with backgrounds in energy, finance, and consulting, offering unparalleled expertise across power, renewables, storage, hydrogen, carbon, and fossil commodities. Our mission is to facilitate the global energy transition through widely trusted quantitative analysis and high-quality decision support.
