Electricity Prices on Exchanges Decline Despite Rising Demand in India
Overview of Electricity Demand and Pricing Trends
In the fiscal year 2025-26, India’s electricity demand increased slightly; however, electricity prices on exchanges fell significantly. Data from the Indian Energy Exchange (IEX) indicates that a record 141 billion units were traded during the year, while real-time market prices decreased between 14 to 16 percent year-on-year.
This situation appears contradictory at first glance, but a closer examination of various factors—including supply conditions, growth in renewable energy, market mechanics, and trading behavior—illuminates the reasons behind these trends.
Key Metrics from the Indian Energy Exchange
Several important metrics from FY26 highlight the dynamics in the electricity market. Electricity traded on IEX increased by 17% year-on-year, totaling 141 billion units. The average price in the Day-Ahead Market was Rs 3.86 per unit, representing a drop of 13.7% from the previous year. The average price in the Real-Time Market was Rs 3.59 per unit, a decline of 16% from the prior year. Additionally, renewable energy certificates saw a year-on-year increase of 5%, reaching 187.20 lakh, while national power demand experienced a modest growth of 1.1%.
Moreover, Q4 of FY26 demonstrated a marked increase, with IEX reporting a 24.3% year-on-year rise in traded electricity volumes.
Drivers Behind Price Reductions
The moderation in electricity prices can be traced to several key factors. A major contributing factor is that supply growth has outstripped demand growth. While demand rose by only 1.1% in FY26—considered modest historically—India expanded its non-fossil capacity by an unprecedented 55.29 gigawatts during the same period, primarily through solar and wind energy initiatives. Renewables now account for approximately 29% of total electricity generation and constitute half of the nation’s installed capacity.
Kunal Maheshwari, Chief Growth Officer at Softlink Global, noted that the increased integration of renewable energy is essential to the ongoing structural transformation in India’s power market. He explained that low-cost renewable energy sources, improved grid management, and efficient distribution are bolstering market responsiveness. This alignment fosters more competitive and transparent price discovery, ultimately reducing price spikes.
Improved reliability of thermal generation has also played a significant role in tempering prices. Enhanced coal stock management and logistics have minimized unplanned outages, allowing thermal plants to operate more predictably and contributing to price stability in the spot market.
Shifts in Purchasing Strategies and Market Dynamics
According to Piyush Jhunjhunwala, Founder and CEO of Stockify, distribution companies (DISCOMs) have been increasingly active in the spot market. They now leverage competitive exchange pricing rather than committing to long-term agreements that typically result in higher costs. The IEX platform facilitates improved market access and pricing transparency, empowering traders to optimize their purchases and maintain stable tariffs.
Jhunjhunwala further emphasized that India’s power market has seen enhanced operational efficiency and greater market control, enabling the country to effectively manage rising energy demands through diverse power sources, government policies, and digital trading systems.
Transitioning to a Diverse Energy Landscape
The evolution of price setting within the power market reflects increased participation from DISCOMs and industrial buyers. With a shift away from rigid long-term contracts towards competitive, exchange-based pricing, the market dynamics are undergoing significant changes. The varied sources of renewable and thermal energy continue to smooth out supply discrepancies, decreasing price volatility.
As the fiscal year progresses, the thermal energy sector’s share in generation is expected to fall below 70%, while renewable sources continue to grow at double-digit rates. This transition fosters a power pricing environment increasingly characterized by abundant renewable supply and advanced trading practices, moving India towards a more resilient energy future.
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Contents
Overview of Electricity Demand and Pricing TrendsIn the fiscal year 2025-26, India’s electricity demand increased slightly; however, electricity prices on exchanges fell significantly. Data from the Indian Energy Exchange (IEX) indicates that a record 141 billion units were traded during the year, while real-time market prices decreased between 14 to 16 percent year-on-year.This situation appears contradictory at first glance, but a closer examination of various factors—including supply conditions, growth in renewable energy, market mechanics, and trading behavior—illuminates the reasons behind these trends.Key Metrics from the Indian Energy ExchangeSeveral important metrics from FY26 highlight the dynamics in the electricity market. Electricity traded on IEX increased by 17% year-on-year, totaling 141 billion units. The average price in the Day-Ahead Market was Rs 3.86 per unit, representing a drop of 13.7% from the previous year. The average price in the Real-Time Market was Rs 3.59 per unit, a decline of 16% from the prior year. Additionally, renewable energy certificates saw a year-on-year increase of 5%, reaching 187.20 lakh, while national power demand experienced a modest growth of 1.1%.Moreover, Q4 of FY26 demonstrated a marked increase, with IEX reporting a 24.3% year-on-year rise in traded electricity volumes.Drivers Behind Price ReductionsThe moderation in electricity prices can be traced to several key factors. A major contributing factor is that supply growth has outstripped demand growth. While demand rose by only 1.1% in FY26—considered modest historically—India expanded its non-fossil capacity by an unprecedented 55.29 gigawatts during the same period, primarily through solar and wind energy initiatives. Renewables now account for approximately 29% of total electricity generation and constitute half of the nation’s installed capacity.Kunal Maheshwari, Chief Growth Officer at Softlink Global, noted that the increased integration of renewable energy is essential to the ongoing structural transformation in India’s power market. He explained that low-cost renewable energy sources, improved grid management, and efficient distribution are bolstering market responsiveness. This alignment fosters more competitive and transparent price discovery, ultimately reducing price spikes.Improved reliability of thermal generation has also played a significant role in tempering prices. Enhanced coal stock management and logistics have minimized unplanned outages, allowing thermal plants to operate more predictably and contributing to price stability in the spot market.Shifts in Purchasing Strategies and Market DynamicsAccording to Piyush Jhunjhunwala, Founder and CEO of Stockify, distribution companies (DISCOMs) have been increasingly active in the spot market. They now leverage competitive exchange pricing rather than committing to long-term agreements that typically result in higher costs. The IEX platform facilitates improved market access and pricing transparency, empowering traders to optimize their purchases and maintain stable tariffs.Jhunjhunwala further emphasized that India’s power market has seen enhanced operational efficiency and greater market control, enabling the country to effectively manage rising energy demands through diverse power sources, government policies, and digital trading systems.Transitioning to a Diverse Energy LandscapeThe evolution of price setting within the power market reflects increased participation from DISCOMs and industrial buyers. With a shift away from rigid long-term contracts towards competitive, exchange-based pricing, the market dynamics are undergoing significant changes. The varied sources of renewable and thermal energy continue to smooth out supply discrepancies, decreasing price volatility.As the fiscal year progresses, the thermal energy sector’s share in generation is expected to fall below 70%, while renewable sources continue to grow at double-digit rates. This transition fosters a power pricing environment increasingly characterized by abundant renewable supply and advanced trading practices, moving India towards a more resilient energy future.
