Key Points

The situation came due to the twin impact of early monsoon rains and a huge 25-gigawatt solar capacity addition over the past year.

According to the IIFL Capital report, the situation was further compounded by limited thermal power backup, which created a rare surplus that sent prices on the power exchange tumbling to the bottom.

The situation arises because India has not created a sufficient pumped or battery power storage system to store the surplus power generation. The IIFL report analysed the impact of the incident on various parts of the energy ecosystem.

In India, we need both Pumped Storage Projects and Battery Energy Storage Systems that will benefit from surplus renewable energy (RE) supply available at very low prices.

The situation is positive for the Commercial and Industrial (C&I) storage players, especially those with access to captive demand (TPWR, JSWEL, etc.), allowing RE capacity addition irrespective of grid-level supply constraints.

The current situation is also beneficial for the exchanges as higher liquidity and lower prices equate with higher exchange volumes.

The government is also actively promoting energy storage solutions, including both Pumped Storage Projects (PSPs) and Battery Energy Storage Systems (BESS), to improve grid stability and harness renewable energy sources.

Specifically, the Ministry of Power and the Central Electricity Authority (CEA) are involved in approving Detailed Project Reports (DPRs) for PSPs and formulating schemes for BESS, like the Viability Gap Funding scheme.

The report says green hydrogen and centres will sustain future growth. "In addition to increased dependence on pumped storage and battery projects, we expect accelerated forays into adjacencies like green hydrogen, centres, and electricity-intensive manufacturing processes to sustain growth and enhance value capture."

It adds that the increasing requirement for adding larger storage capacities to RE projects will firm up supply and forward integration into adjacencies for enhanced value capture. It will also materially drive up capex per MW.

Recent government data suggests India added a total power-generating capacity of 13,495 megawatts (MW) in the first quarter (1Q) of 2025, in which renewables accounted for 78.9 per cent of all new capacity additions.

Solar power was the main contributor to this growth, accounting for 57.7 per cent of the total capacity addition.

- ANI