Manufacturing clusters, export-oriented industries, and data centres can procure clean electricity through open access or captive routes, gaining long-term cost certainty while absorbing large volumes of new capacity
For decades, India’s power sector grappled with scarcity and affordability issues even as it undertook complex and ambitious power-sector reforms. Today, we add 40 GW of renewable capacity every year, far more than in most developed economies and cheaper than in most geographies. The task is to organise markets, institutions, and demand. Absorption is becoming a constraint with nearly 42 GW of renewable capacity awarded through auctions yet to find buyer utilities. Distribution companies are cautious about additional clean energy commitments. To sustain clean-energy momentum, the pool of buyers must expand. Two structural shifts make this possible.
The first is the fall in clean-energy prices. Recent reverse auctions have closed at around Rs 3 per unit for solar power paired with storage — with prices remaining flat in nominal terms for 12 to 25 years. These projects can deliver near round-the-clock supply at the same prices. The second factor is a product of institutional reform. Open access and captive procurement allow large industrial and commercial consumers to buy power from anywhere in the country by paying network charges. Roughly a quarter of India’s renewable capacity addition is now driven by this. This transition will allow utilities to evolve into strong grid and reliability platforms while new demand absorbs low-cost clean power. Where will new demand come from?
The second factor is a product of institutional reform. Open access and captive procurement allow large industrial and commercial consumers to buy power from anywhere in the country by paying network charges.
First, manufacturing clusters, export-oriented industries, and data centres can procure clean electricity through open access or captive routes, gaining long-term cost certainty while absorbing large volumes of new capacity. Such clusters, offering Indian exports an edge under carbon border measures such as the EU’s CBAM, could unlock FDI and green finance, accelerating industrial growth and clean-power deployment. Second, nearly half of India’s industrial energy demand is to process heat, with a large portion supplied by imported oil and gas. Electric heat pumps and high-temperature heat batteries allow this demand to shift towards clean electricity.
Third, fertiliser and steel are important sectors, yet depend on imported gas and coking coal. Recent green ammonia auctions reveal fertiliser production using clean electricity is competitive. With continued cost declines, green steel could follow a similar path. Fourth, electrifying buses, commercial fleets, and freight corridors can create a large and flexible demand source for domestic clean power. When charging is aligned with daytime solar output, electricity demand rises when clean power is most abundant. Fifth, distributed rooftop solar across commercial buildings, MSMEs, and homes lowers bills and improves resilience. For utilities, it reduces peak demand, losses, and subsidy burdens.
Large buyers could transition faster if long-term clean-energy contracts were aggregated and securitised through dedicated finance platforms. Smaller consumers will need India Stack–connected fintech products to reduce transaction friction. Expanding demand for clean electricity is also the most effective way to absorb India’s excess solar panel manufacturing capacity. One concern is that key components, particularly batteries, are often imported. India has shown through solar manufacturing that such dependencies can be reduced with scale and policy certainty. Batteries can follow a similar trajectory, supported through partnerships with allied economies to secure critical minerals.
Robust domestic demand has always been the Indian economy’s greatest strength. It can now also work for its energy transition. India’s cheapest power has arrived. Building the markets, institutions, and end-use pathways will define the journey to Viksit Bharat.
Originally Appeared in Indian Express.
Samir Saran 