Falling solar prices call for storage systems

POWER SHIFT: Battery energy storage systems can stabilise the grid and unlock new revenue streams
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The Desert Photo

On May 25, between 9.30 and 9.45 am, the market clearing price of solar power sold on the real-time market (RTM) of the Indian Energy Exchange (IEX) was zero. This meant that anyone who bought solar power from the market would have had to pay only the transmission and open access charges.

The price stayed zero only for a brief period, but it still raised eyebrows. Renewable energy observers may remember that just a decade ago, experts were predicting the fall in solar prices to “grid parity” levels. Humpty Dumpty couldn’t have had a greater fall.

The ‘zero price’ was perhaps an outlier, but throughout May renewable energy prices were subdued. Particularly on May 25, near-zero prices were recorded across several time blocks between 9.15 am and 2.30 pm. Thanks to unseasonal rains and the early onset of the monsoon, there was a 4 per cent drop in electricity consumption year-on-year.

“At the same time, increased hydro, wind and thermal generation enhanced supply liquidity on the exchange platform, resulting in lower prices both in the day-ahead market (DAM) and RTM,” says Rohit Bajaj, Joint Managing Director, IEX. The RTM market clearing price averaged ₹3.43 per unit in May 2025 — a 28 per cent decline year-on-year. “These prices presented an opportunity to discoms and commercial and industrial consumers to meet their demand at a competitive price and to replace their costlier power by procuring through exchanges,” Bajaj tells businessline. As a result, the RTM segment recorded its highest ever monthly volume — 4,770 million kWhr — in May 2025, marking a 42 per cent year-on-year increase, he says.

Grid stability

On the flip side, the decline in solar prices, taken in conjunction with the falling prices of batteries, has strengthened the case for storage over long-distance transmission. “This is a call for storage,” says Dr Rashi Gupta, a storage expert and the Managing Director of Vision Mechatronics. “The price signals are there and the direction is clear. We need to allow demand and market forces to choose storage technologies,” Gupta, who is also a member of the UN Council of Engineers for Energy Transition, posted on LinkedIn.

She added that the shift to zero tariffs during peak solar hours “highlights the need for innovative solutions”. Battery energy storage systems (BESS) can, she pointed out, stabilise the grid, provide flexibility, and unlock new revenue streams.

Other experts agree. “With the anticipated surge in solar power in the coming years, we are likely to see a structural shift toward lower daytime energy prices,” says Ashwin Gambhir, Fellow, Prayas Energy Group, a Pune-based energy think-tank. “This presents a valuable opportunity to improve the time-of-day tariff design and expand the role of energy storage in strengthening the Indian power grid,” Gambhir says.

Disha Agarwal, Senior Programme Lead at the Council for Energy, Environment and Water (CEEW), points out that only about 7 per cent of generated power is traded on the exchanges in India, and as a last resort, after meeting most of the demand through long-term contracts and accounting for local supply disruptions due to weak networks. “That said, there lies a huge untapped opportunity in turning consumers into active market participants and avoiding supply-demand mismatches,” she says.

She points to a recent CEEW finding that 24 GW of demand shift from evening to daytime hours in 10 states could help India absorb an additional 40 BU of renewables in 2030, which would otherwise be curtailed or remain unsold. Many states are already trying to implement time-of-day electricity pricing through smart meters; in Gujarat, for instance, consumers with smart prepaid meters get ₹0.60 per unit discount between 11 am and 3 pm.

Frequency impact

Experts have also noted that storage, hybrids, and flexible demand are not optional any more. This is not just because plain vanilla solar does not get a good price. At times, when more solar energy is injected into the grid and there isn’t much demand, it affects the frequency. This has been noted in the minutes of the 29th meeting of the National Committee on Transmission. Observing that high solar power injection causes “persistent high frequency” in the grid, the document notes that thermal generation stations are having to be backed down to accommodate solar.

It notes: “As thermal generating units are required during non-solar hours to ensure resource adequacy, these units cannot be taken out of service during the high-frequency operation period. The addition of more solar generation without commensurate energy storage would further increase the coal flexibility challenge during the daytime.”