India crossed a major milestone in June 2025—50% of its electricity generation capacity now comes from non-carbon-emitting sources, a testament to the Prime Minister’s clean growth vision. This marks a celebratory moment in India’s energy transition journey.

 

But this transition is not a straight highway—it’s a long road trip requiring frequent gear shifts to adapt to changing terrain. India must now navigate rising demand, supply volatility, and evolving market dynamics to replace its fossil-fuel-based system with a clean, flexible, and inclusive energy ecosystem.

 

Rising and Shifting Demand

 

Electricity demand in India has surged—over 20% in the last three years, and nearly doubled in the past 12. Peak demand now occurs in May and September, driven by heatwaves and post-monsoon industrial activity. Daily peaks have shifted too, now occurring around 3 PM and 9:30 PM, compared to 11 AM and 7 PM in 2010.

 

With residential and commercial sectors now making up 45% of demand, electricity use fluctuates sharply due to weather-sensitive appliances like ACs and geysers. Regionally, northern states have increased their consumption share, while western states have declined. In summary, India is experiencing a significant rise and volatility in electricity demand, along with changes in when and where that electricity is needed. 

 

Variable Supply 

 

On the supply side, clean energy sources like solar and wind are inherently variable and time-bound. They currently meet 25% of afternoon demand and only 10–12% of evening demand and are increasing. Solutions like Round-the-Clock renewable energy, delivered through a combination of solar, wind, hydro and storage are gaining ground, but more capacity is still needed to meet a larger share of the electricity demand.

 

The Need for Flexibility and Market Evolution: From Long-Term Contracts to Quick Commerce

 

Aligning volatile demand with variable supply across all hours and seasons, at the national level, is a growing challenge. While legacy coal systems provide backup, India urgently needs clean alternatives that can ramp up or down within minutes to handle sudden surpluses or shortfalls. Equally important is the ability to manage demand flexibly, reducing or shifting consumption when needed - such as during sudden drops in supply due to unexpected weather or spikes in air conditioning use.

 

The largest buyers of electricity, the electricity distribution companies (DISCOMs) also increasingly require flexibility, to benefit from falling prices and meet shifting consumer needs. They are growing reluctant to sign the 25-year power purchase contracts.

 

Spot markets, which handle around 10% of India’s electricity, offer agility but are highly volatile. Prices can drop to near zero during solar hours and spike to ₹10/unit in the evening. Regulatory constraints that cap consumer tariffs discourage DISCOMs from engaging in these risk-prone markets, despite their potential for dynamic and significantly higher procurement.

 

This need for flexibility is driving the entry of India’s electricity markets into a quick-commerce era, where minute-level responsiveness is becoming the premium. The traditional model—that of long-term Power Purchase Agreements (PPAs)—is under strain, but has its benefits and is likely to retain a sizeable share of the market.   

 

Broadening Participation

 

The transition has so far relied on mandates for DISCOMs and select large industries, but this is no longer sustainable, especially as DISCOMs hesitate. India’s emissions profile is also shifting, as we industrialise and prosper. Industry now accounts for 38% of energy use and 40% of emissions, while households contribute to 35% of electricity demand growth. The rising use of air conditioners alone could add 120–140 GW to peak demand by 2030—more than the total demand of the UK.

 

There’s a tactical need to unlock and diversify clean energy demand, and a moral imperative to place the onus for climate action on more people and organizations. 

 

Policy Innovations: VPPAs, Emission Targets, and the Energy Stack

 

Recognizing these trends, the Government of India has introduced several bold frameworks recently:

 

GHG Emission Intensity Targets

These benchmarks of placing a cap on emissions per unit of output (similar to China and Korea) apply to 282 plants across four high-emitting sectors that account for 15-20% of India’s electricity use—aluminium, cement, chlor-alkali, and pulp & paper. The targets are annual and mandatory, enabling carbon pricing to influence business decisions and IRR calculations. Given that these targets are moderately more ambitious than existing mandates on large industries like PAT and Renewables Consumption Obligations, and that are likely to be expanded to other sectors, this could significantly boost demand for clean energy and energy efficiency.

 

Virtual Power Purchase Agreements (VPPAs)

VPPAs offer price certainty without long-term lock-ins, the attributes that DISCOMs and industries seek. In this financial contract, a buyer and renewable generator agree on a strike price. The generator sells power in the spot market, and payments are exchanged based on price differences. Buyers receive Renewable Energy Certificates (RECs) at predictable costs, while generators gain stable revenue streams—unlocking capital for clean energy projects. 

 

India Energy Stack

Inspired by the success of India Stack (which powers Aadhaar, UPI, and DigiLocker), the India Energy Stack aims to digitally connect generators, DISCOMs, regulators, consumers, and innovators. It will enable real-time data sharing and visibility of distributed assets like rooftop solar and batteries. If we place the onus of climate action on larger populace, the India Energy Stack could give them a tool – to sell clean energy directly to other households instead of through the utilities, and to benefit from participating in demand-side flexibility initiatives. This could transform consumers into active participants, choosing when and how to use or trade electricity.

 

Shifting Gears Toward a Cleaner Future

To conclude, India now stands at the cusp of a new phase in its energy transition—from static to dynamic demand and supply, from rigid contracts to agile markets, and from centralized control to digital, distributed participation. We have made a good start to be ready for what’s coming. With a few more bold policy shifts, especially on enabling supply and demand flexibility, and digital innovation paving the way, we’re surely in for an exciting journey—full of challenges, creativity, and many more transformative milestones.