Indian Energy Exchange’s Analyst Meet Highlights Shift to Renewable Energy
On July 24, the Indian Energy Exchange (IEX) held an analyst meet that primarily presented the company’s business performance. The meeting revealed a notable 17% growth in volume, with revenues reaching ₹747 crore. Alongside these financial updates, IEX is actively involved in a Supreme Court case about market coupling. However, the most significant takeaway is how variability in renewable energy has evolved into a central focus for IEX, transitioning from being just an incidental aspect of the business.
India’s renewable energy capacities are developing at a rapid pace, yet the ability to manage and distribute this energy is lagging. During the earnings call, IEX discussed how India is moving towards a more adaptive, market-driven electricity system. This includes components like energy storage, Firm and Dispatchable Renewable Energy (FDRE), and Contracts for Difference (CfDs), along with carbon markets and other distributed energy solutions.
Here are the five main insights from the recent call regarding renewable energy:
1. Battery Energy Storage Systems (BESS) as a Key Growth Area
Rohit Bajaj, the Joint Managing Director, indicated that the window for BESS merchant arbitrage may only last another three to five years before evening peak demands stabilize due to increasing solar and storage capacities. Management regards BESS as potentially the next Real-Time Market (RTM), emphasizing its role as a growth engine for the exchange.
Currently, about 80% of BESS projects in India operate on a merchant basis, highlighting positive market trends independent of singular contracts or incentive schemes. Companies like Juniper Green Energy, ACME, and Adani Green are already setting up battery systems based on pure market principles rather than long-term power purchase agreements (PPAs).
Additionally, as battery costs drop significantly, the market is indicating a promising arbitrage opportunity. Even in a low-price environment, a margin of about ₹4.5 per unit can make merchant BESS ventures economically viable.
2. The Real-Time Market: More than Just a Product
IEX views the growth of the Real-Time Market as a vital element of integrating renewable energy, not just a simple product success. With a 41% volume increase last year, the RTM is close to matching the Day-Ahead Market’s scale, and it’s expected to continue growing.
This upward trend is primarily driven by the increasing variability of renewable sources. States are frequently buying electricity to cover shortfalls, indicating that the RTM is becoming critical for balancing supply in a growing weather-dependent system.
IEX also pointed out challenges, such as solar generation curtailments, despite an expanding transmission network. Interestingly, much of the current curtailment relates to thermal generation rather than solar production.
Encouragingly, IEX is advocating for more market-based solutions—including CfDs and Virtual Power Purchase Agreements—as essential strategies for future growth in renewable energy.
3. Shift from Power Purchase Agreements to Market Procurement
IEX anticipates that Firm and Dispatchable Renewable Energy (FDRE) will quickly rise in the power market, despite facing higher tariffs. Developers will need to overproduce to meet their firm supply commitments, especially during lower wind periods when they may rely on Battery Energy Storage Systems or market electricity.
On the supply side, developers will sell surplus power generated beyond their commitments, making market-based trading more appealing given the uncertainties of renewable energy generation. This aligns with a broader shift towards flexible, market-driven procurement that emphasizes evening and nighttime demand.
4. Evolving Storage Solutions and Market Structures
As markets for distributed energy resources expand, IEX suggests that exchanges will play an essential role in facilitating local electricity markets. The integration of Battery Energy Storage Systems supports using solar energy efficiently, particularly in the evenings.
Looking ahead, IEX envisions demand response programs and new capacity contracts as vital next steps. Although some regulations may require more time to implement, the government’s roadmap for reforming the electricity market is on track, pushing India closer to a more flexible and mature power system.
5. Emerging Carbon Markets and I-RECs
Carbon markets and International Renewable Energy Certificates (I-RECs) are becoming crucial components for monetizing renewable energy. The Bureau of Energy Efficiency aims to roll out carbon credit trading by October 1, 2026.
IEX’s subsidiary, ICX, noted impressive growth last year in I-RECs, with improvements in time-stamping making these certificates more attractive and aligned with global standards. This could potentially increase the value of renewable energy produced during peak hours.
In conclusion, the Indian Energy Exchange is navigating exciting developments in the renewable energy market, adapting to a more dynamic and market-oriented electricity ecosystem.
