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Prices on the Indian Energy Exchange (IEX) Real-Time Market fell sharply, with the weighted average clearing price dropping 12% to ₹2.81 per unit compared to the previous day.
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Spot electricity prices on power exchanges hit near zero on Sunday (May 25) largely due to soft weekend demand, high power generation and early rains, which analysts and market players emphasise reflect the supply-demand imbalances and curtailment risks.
Electricity curtailment risk is when the grid operator restricts power supply for grid stability.
Power prices in the Real-Time Market (RTM) on the Indian Energy Exchange (IEX) hit a record low from late morning to mid-afternoon on May 25 with the weighted market clearing price declining by almost 12 per cent to Rs 2.81 a unit compared to May 24.
“It is rare. True, record low prices can benefit Discoms, but this event points to several issues. The (Power) Ministry is looking at them. First is demand-supply imbalance and how to address it along with grid congestion. Excess generation with must run status of renewables also needs to be analysed. Advance planning for low and high volume days and what to do with excess capacity needs to be addressed,” a senior government official said.
A top state government official stressed advance planning and better demand-supply exercise. Thermal, renewables, hydro, etc., are all running at optimum capacity, resulting in huge inflows into the grid. During low-demand periods, such as weak consumption from industrial and commercial customers on weekends, high inflows could lead to grid imbalances.
“Imagine a scenario where demand drops within a few hours in North India due to widespread rains, while generation is on a high due to the summer season. We need better and advanced planning, particularly with high demand and low demand periods,” he added.
Power exchanges account for around 7-8 per cent of the electricity traded in the country, while the rest is through power purchase agreements (PPAs), etc.
Curtailment Risk
IIFL Capital had earlier flagged the “Solar Maximum” risk, expecting that the grid would run out of space to assimilate incremental solar capacity during sunlight hours, increasing ‘curtailments’.
“It seems our thesis is playing out sooner than expected, and the spot market is providing corroborating ‘price signals. In fact, we believe around 18 gigawatt (20 per cent of installed solar capacity) was curtailed on May 25, on account of low weekend demand.”
“If this trend persists, expect a slowdown in RE PPAs/ capacity addition, as Discoms wait for demand revival, having a cascading negative impact across the value chain developers (execution delays, generation curtailment), solar cell-module manufacturers (adverse change in domestic demand-supply equation), wind & transmission equipment suppliers (ordering slowdown), EPC players, financiers, etc,” the brokerage explained.
The “Solar Maximum” happening sooner than expected was due to weak demand of around 190 gigawatts (GW) on average during weekends, with the additional impact of early monsoon, 25 GW solar capacity addition in the last 12 months, and limited thermal capacity back down.
An executive with a leading power generator said that it is pertinent to invest in AI tools to enhance predictive analysis for short-term and long-term optimisation models.
A senior analyst who did not wish to be quoted explained that high RE capacity also enhances risks of grid instability. If capacity addition is poorly planned, it can lead to price suppression and idle capacities. It is important to integrate storage and advanced analytics to address these issues.
Besides, solar power producers could not earn any revenue. It reflects the mismatch between the cost of generation and prices, a development that can skew developers’ interest in solar energy.
Published on May 28, 2025
This article first appeared on The Hindu Business Line
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