Aurora Energy Research: India's ?10/kWh price cap could undermine renewables investment, slow down power sector decarbonisation

The price cap restricts the deployment of onshore wind and batteries, leading to ? 7 trillion higher cumulative wholesale power costs and 1% higher carbon emissions due to increased coal generation.

DELHI, India, Feb. 5, 2025 /PRNewswire/ -- India's energy market will see the current ?10/kWh Day Ahead Market (DAM) price cap lead to ?7 trillion higher cumulative wholesale power costs and 1% higher carbon emissions due to increased coal generation between 2025–2060, Aurora Energy Research's Power and Renewables Market Forecast for India finds.

This is a consequence of the value lost by onshore wind generation and battery energy storage system (BESS) assets.

As the deployment of cheaper renewables and storage is hindered by the price cap, average power prices between 2030–2060 are 1% higher, which leads to ?7 trillion higher cumulative wholesale power costs over the next 35 years. The price cap additionally results in higher emissions as coal-fired generation remains in the system for longer, amounting to an additional 224 MtCO2e emissions over the same period. Further, concerns around the price cap also have a detrimental impact on investor confidence, which could slow down the decarbonisation of the power sector.

Debabrata Ghosh, Head of India, Aurora Energy Research, says: "The price cap on the power exchange(s) in India aims to reduce the cost of power/insulate India's consumers and industry from high price shocks. Our analysis reveals that as a result of the price cap, lower LCOE, green technology, and battery buildout is inhibited, thereby increasing the overall system cost of power. Globally, we have seen mechanisms to de-hyphenate wholesale price cap and retail price caps as well. " Ashutosh Padelkar, Research Lead, India, Aurora Energy Research, adds: "India needs significant investment over the next few years to deliver its targets of 500 GW fossil fuel-free power generation capacity by 2030. Investor confidence and a stable regulatory environment are critical in enabling this investment. The declining price cap has the effect of weakening investor confidence in key technologies like batteries and onshore wind, which are vital to meet the government's targets." MEDIA CONTACT [email protected] AURORA ENERGY RESEARCH Established in 2013, Aurora Energy Research is a global provider of power market analytics for investment and financing decisions. Headquartered in Oxford, we operate out of 16 offices worldwide covering Europe, NORAM, LATAM, Asia, and Australia.

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