India, which witnessed a seven per cent Y-o-Y growth in power demand in 2023, was the only market that did not see any substantial decline in wholesale electricity prices last year, the International Energy Agency (IEA) said.

The price of ₹5.50 per unit can be attributed to tight power supply amid high demand further exacerbated by unusually hot and humid weather that sent the peak electricity demand spiralling to an all time high of more than 240 gigawatts (GW) in September last year.

“India remains the only market that did not post a substantial drop in wholesale electricity prices in 2023. Prices fell four per cent in 2023 to ₹5,540/ megawatt hour (MWh) ($68/MWh), but were still almost double those in 2019. The tight supply situation due to strong demand growth kept prices elevated,” the IEA said in its Electricity 2024 report.

According to data from the Indian Energy Exchange (IEX), India’s largest power exchange, the average market clearing price in its most traded Day Ahead Market (DAM) segment was ₹5.51 per unit in 2023.

In January-March 2023, the average market price on DAM was ₹6.07 a unit, which fell to ₹5.17 in Q2 2023, but again rose to ₹5.80 a unit in July-September and finally settled at ₹5 a unit in October-December 2023.

“The price cap of ₹10,000 per MWh continued to be implemented to protect the interests of buyers. Further, a high price segment was introduced to cover costly power generation technologies (gas and imported coal), but has seen low and intermittent buyer presence,” the international agency said.

Power demand

The IEA pointed out that India’s electricity demand rose by 7 per cent in 2023 compared to last year’s 8.6 per cent.

“Continued rapid economic expansion and robust demand for space cooling were the main pillars of growth. After two consecutive years of strong gains, India’s electricity consumption surpassed that of Japan and Korea combined at the end of 2023,” it noted.

Bolstered by a fast-growing economy and powered by increased electrification, IEA expects India’s electricity demand to rise by an annual average of 6.5 per cent over the 2024-2026 period.

“While China provides the largest share of demand growth in terms of volume, India posts the fastest growth rate out to 2026 among major economies. Following this, India will have added additional electricity demand roughly equivalent to that of the United Kingdom over the next three years,” it added.

Renewables inch up

Coal-fired supply remains the mainstay, but the share of renewables in electricity generation is expected to reach the 25 per cent mark in 2026, the IEA noted.

“To meet rising demand, about 80 GW of additional thermal capacity is needed in the next decade according to the government. Coal-fired generation will remain dominant but is expected to fall from 74 per cent of total electricity generation in 2023 to 68 per cent in 2026,” it added.

Renewable energy generation is forecast to grow from around 21 per cent of the mix to reach a 25 per cent share in 2026, the agency has projected.