The country’s spot electricity prices on power exchanges briefly touched zero in May, driven by unseasonal rain across the country and a surge in renewable power generation. According to a report by IIFL Capital, limited thermal power backup created a rare surplus, pushing prices on the power exchange to record lows.
On May 25, 2025, average day-ahead prices dropped to just Rs 0.56 per unit, with near-zero prices observed during several time blocks between 9:15 AM and 2:30 PM. The average daily price on that day was Rs 1.53 per unit. For the entire month of May, real-time electricity prices declined by 25 percent year-on-year to an average of Rs 3.56 per unit.
One of the key factors behind the reduced reliance on thermal power is the addition of 25 gigawatts (GW) of solar capacity over the past year. However, India currently lacks adequate pumped storage or battery energy storage systems to absorb surplus generation, further contributing to price volatility.
The report recommends the development of Pumped Storage Projects (PSPs) and Battery Energy Storage Systems (BESS), which could effectively utilize surplus renewable energy available at very low cost.
Recent government data shows that India added 13,495 megawatts (MW) of power-generating capacity in the first quarter (Q1) of 2025, with renewables accounting for 78.9% of new capacity additions. Solar power was the largest contributor, comprising 57.7% of the total additions.
Meanwhile, although the country had projected a peak power demand of 266 GW for May, unseasonal rains and thunderstorms kept the actual peak lower, at 231 GW as of May 26. The government had initially anticipated the summer peak demand would reach 270 GW. Overall, India’s electricity consumption in May has declined by at least 4 percent year-on-year.
Currently, power exchanges handle approximately 7% of the electricity traded in India, with the remaining volume transacted through long-term power purchase agreements (PPAs).