India’s industrial sector is undergoing massive transformation when it comes to electricity procurement. Power prices plummeting below 1 per unit during the solar hours has given a impetus for the manufacturers and other high power consuming industries to move towards the open access (market-based electricity procurement) rather than relying on the conventional ways of procuring electricity.
According to recent industry reports, commercial & industrial (C&I) consumers on power exchanges have seen participation jump by over 50 percent in FY26. This steep rise in participation has been fueled by rising comfort in the exchange-based procurement of electricity, as industries explore avenues to reduce operational costs and increase their competitiveness on the global scale.
Why are Industries pivoting to power exchanges?
Electricity is the most critical and one of the highest operational expenses for sectors such as cement, steel, automobile, chemical, paper and other manufacturing segments. In multiple high energy consuming industries, electricity costs are around 50% of the entire manufacturing cost, so even a few points’ reduction in electricity prices could make a difference in bottom line.
Electricity prices dropping to sub-1 per unit during solar hours and, sometimes approaching zero prices in the case of excessive Solar power generation has become a game-changer for industries across sectors to make their choice. These days, even those industries, which were at the helm of procuring their electricity from traditional means like State owned DISCOMs or captive power plants have begun to diversify their energy portfolio by balancing these with the power market based transactions.
The role of renewable energy in driving prices down
One of the key drivers for these reduced power prices has been the rapid expansion of renewable energy infrastructure across India, particularly solar energy. Solar power, as on date accounts for nearly half of India’s total installed renewable capacity, making it increasingly abundant during the day, resulting in depressed prices on power exchanges.
This in-turn benefits many C&I consumers that can match their consumption to the renewable production schedule and can get extremely low-cost electricity, without being restricted to long-term Power Purchase Agreements( PPAs)
Not only this, the availability of cheap renewable green energy not only help in mitigating carbon emissions by companies but also help them achieve their sustainability goal. Given the increasing pressure from global companies and investors for reduction in carbon emissions the option to procure renewable energy from the exchanges provides the much needed sustainable and cost effective solution for C&I.
A look into open access power procurement
Since theElectricity Act 2003, theIndian power markethas evolved to offer more choices to consumers by making provisions for the open access regime. This paved the way for Eligible consumers to seek power from any generator or through competitive power market mechanism directly or through any power trading companies. These day, consumers could choose among: Day Ahead market (DAM), Real time Market (RTM) Green Day Ahead Market and REC based markets.
Cost optimisation: a competitive edge for Indian Industries
As India charts ambitious goals for export growth and strengthens its position as a global manufacturing hub, driving down production costs becomes a crucial objective for businesses. Cheaper electricity costs translate directly into better competitiveness in international markets.
Those manufacturers that are able to optimally utilize the exchange-based transactions can achieve substantial savings by procuring cheaper power when prices fall and by avoiding the costs associated with expensive, long-term power contracts. The ability to adapt quickly to shifting market conditions without compromising operational efficiency is becoming a key differentiator.
Industry experts and manufacturers have highlighted that the flexibility offered by the modern power exchanges in response to market trends and environmental conditions has become a strategic advantage in decision making and procurement process. This can result in direct impact on procurement prices depending on price trends, weather conditions, and generation levels.
Govt Policies to Support the shift
With several State governments, also offering attractive incentives on renewable procurement via Green markets (e.g., waivers of cross-subsidy surcharges in some states on such transactions), the shift towards market-based electricity purchase by the industries across sectors will gather further momentum. This has not only been helpful in promoting green energy purchase by the industries but also aided in lowering costs without compromising on the overall availability of electricity through an increasingly competitive market discovery of prices.
The Government continues to work towards modernizing the power sector with policies and regulations that foster greater competition, transparency and price discovery, ensuring a more balanced and beneficial ecosystem for industrial power consumers.
Will it change the future of manufacturing in India?
The massive uptake of exchange-based power purchasing by industries in India and, the availability of cheap power in solar hour could significantly re-shape the Indian industrial landscape and make it a truly global manufacturing hub. It not only directly impacts the competitiveness and profitability of businesses in the current challenging environment but also sets India on the path for faster decarbonisation of industrial energy usage with growing contributions of renewable energy in the country’s power mix.
As the cost of generation of renewable energy continues to fall and capacities grow significantly, the access to cheap power to the industries across the board through innovative market mechanisms shall certainly play a pivotal role in India’s long term economic aspirations.
Conclusion
The current scenario wherein prices on Indian power exchanges are touching less than 1 per unit during solar hours is the turning point in energy procurement, particularly for the Indian industrial segment. A greater than 50% increase in participation from C&I segments of power exchanges reflects the growing trend of businesses aligning themselves with efficient and cost-effective electricity sourcing from the market. Driven by abundant and ever-increasing renewable energy capacity, pro-active policy initiatives, and enhanced open-access opportunities, it is poised to continue this upward journey. For the Indian manufacturer, low-cost energy is transitioning from merely a benefit to a crucial strategic lever that will drive competition, innovation and the future of sustainable industrial growth.
