Shifting Gears in Indian Energy Transition, A Strategic Pivot Towards Clean, Flexible, and Digital Energy Ecosystems
Introduction
India’s energy landscape is undergoing a historic transformation. In June 2025, India reached a critical milestone—50% of its electricity generation capacity now originates from non-carbon-emitting sources. This achievement, aligned with the Prime Minister’s long-standing vision for clean energy, marks not just a celebratory checkpoint but a turning point in India’s complex and long-term journey toward energy sustainability and security.
However, while this milestone is important, the road ahead is fraught with operational, financial, and infrastructural challenges. India’s energy transition is no longer just about increasing renewable capacity—it is about making the energy system more flexible, efficient, demand-responsive, and digitally connected.
In a world confronting the brutal realities of climate change, economic uncertainties, and geopolitical disruptions, India’s ability to shift gears rapidly and restructure its power sector holds global significance. This article explores the tactical, technological, and systemic shifts needed to build a cleaner, fairer, and more resilient Indian energy economy.
Electricity Demand: Surging with New Complexities
Electricity demand in India has surged by over 20% in the last three years, nearly doubling in the past 12 years. Much of this increase is due to rising industrialisation, population growth, and household electrification. But seasonal, time-specific, and climate-driven consumption patterns now demand unprecedented agility in supply management.
Time-of-Day Peaks
Peak electricity demand now occurs more often in May and September, driven by intense heatwaves and delayed monsoons. On typical days, peak hours fall between 3 PM and 9:30 PM, compared to 11 AM and 7 PM in 2010. These changes have complicated load balancing for utilities, especially during unexpected weather events or power outages.
With residential and commercial users accounting for 45% of total demand, the proliferation of air conditioners, heaters, and smart appliances has caused unpredictable spikes in usage. Northern states in particular have witnessed increases in per capita consumption, while western and southern states are gradually stabilising or even reducing their usage due to efficiency measures.
Supply-Side Evolution: Renewable Energy and Storage
The supply side is evolving rapidly, driven by three core imperatives:
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Decarbonisation
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Decentralisation
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Digitalisation
Clean Energy Scale-Up
Clean energy sources such as solar and wind are now cheaper, scalable, and more sustainable than fossil fuels. Their variability, however, demands robust grid integration, flexible storage, and demand-side responsiveness.
Currently, India sees:
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50–60% of solar power generation during the daytime.
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10–12% of wind power during evening hours.
To smoothen these inconsistencies, India must invest in technologies like pumped hydro storage, battery-based solutions, and hybrid generation (solar + wind + gas).
Demand Flexibility: The Next Frontier
India must now shift its focus to managing demand-side flexibility, which refers to the ability to shift or reduce electricity consumption in response to supply constraints or price signals.
Why Flexibility Matters
Legacy coal systems are good at providing base load but lack speed in ramping up for sudden spikes. In contrast, clean alternatives like solar and wind can falter during shortfalls. Hence, improving demand flexibility through digital tools and behavioural incentives is essential.
For example, smart home systems that automatically reduce AC consumption during peak hours, or industrial users that shift operations to off-peak times, can dramatically ease pressure on the grid.
Role of DISCOMs
India’s electricity distribution companies (DISCOMs) play a central role in managing and deploying this flexibility. They benefit from falling wholesale prices, but they also face the challenge of updating legacy contracts and infrastructure. As consumer needs evolve, DISCOMs must adapt to:
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Variable power contracts (2–5 years)
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Real-time dynamic pricing
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Aggregator models to pool consumer flexibility
Market Innovations: Creating New Economic Pathways
Spot Markets
India’s spot electricity markets handle about 10% of total power transactions, reflecting a still-maturing ecosystem. However, pricing volatility—ranging from ₹10/unit in summer evenings to near-zero during solar-rich afternoons—makes it difficult for DISCOMs to plan stable procurement.
Regulatory Contracts
India needs a new procurement model. The traditional long-term power purchase agreements (PPAs) are rigid, expensive, and unable to keep up with rapid changes in demand and generation.
Instead, flexible tools like virtual power purchase agreements (VPPAs) and contracts for difference (CFDs) can bring agility and price stability. These models de-link generation from physical delivery, allowing more players (especially in the private sector) to hedge risks, trade power, and scale renewables.
Policy Shifts: A New Era of Energy Law and Regulation
The government has introduced several landmark reforms to support this transition.
New Electricity Market Frameworks
Recent legislative frameworks now allow:
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Peer-to-peer electricity trading
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Open access for industrial consumers
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Aggregation of distributed energy resources
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Time-of-day pricing models
This regulatory liberalisation is essential to unlock consumer-side flexibility and empower demand-side players.
Greenhouse Gas Emission Targets
India has introduced sector-specific carbon intensity targets. For instance:
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Aluminium, steel, and cement industries must reduce emissions by 15–20%.
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282 plants across four major sectors are being benchmarked.
These emission norms, while less stringent than the EU’s carbon trading system, create a pricing signal that influences procurement and investment decisions.
India Energy Stack: The Digital Backbone
Inspired by India’s fintech revolution (e.g., UPI, Aadhaar, DigiLocker), the government is developing the India Energy Stack to digitally integrate generators, regulators, retailers, consumers, and investors.
What is the India Energy Stack?
The stack includes:
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Smart metering APIs
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Grid flexibility protocols
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Demand response mechanisms
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Digital green certificates
It allows real-time auditing, settlement, and trading of electricity flows, emissions, and credits—creating an integrated, transparent, and data-driven energy marketplace.
Virtual Power Purchase Agreements (VPPAs)
VPPAs offer price certainty without locking buyers into physical delivery. Under this model:
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Renewable generators agree to a fixed price (“strike price”).
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The buyer (corporate, utility, or investor) pays the difference between the strike price and spot price.
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Buyers also receive renewable energy credits for compliance and branding.
This model is especially beneficial for industries with high ESG goals and volatile energy needs. It allows them to fund new renewable projects without relying on traditional DISCOM contracts.
The Tactical and Moral Imperative
As Sumant Sinha notes, there’s not just a tactical need, but a moral imperative to place the climate agenda at the centre of energy planning.
This means:
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Unlocking demand flexibility
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Decentralising clean power generation
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Using digital tools for smart distribution
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Mainstreaming new business models like VPPAs, energy aggregators, and time-of-day pricing
India’s energy story is no longer about adding megawatts—it is about creating a smart, sustainable, and inclusive energy ecosystem.
Challenges That Still Remain
Despite significant progress, India’s energy transition faces persistent roadblocks:
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Financial health of DISCOMs: Legacy debt and poor revenue recovery remain a concern.
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Storage technology: Battery costs are still high, and grid-scale storage is limited.
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Land acquisition and clearances: Renewable projects often face bureaucratic delays.
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State-centre coordination: Energy is a concurrent subject, making policy harmonisation difficult.
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Consumer awareness: Many residential and MSME consumers are unaware of flexible pricing or green power options.
Conclusion: A Journey of Innovation, Inclusion, and Urgency
India’s energy transition is well underway, but it must now shift from a megawatt-driven race to a mission-driven transformation. This involves moving:
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From generation to flexibility
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From centralised plants to distributed solutions
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From carbon-heavy fuels to digital clean ecosystems
The new frontier is demand responsiveness, market reform, and digital integration. If India can navigate this transformation successfully, it will not only meet its own climate goals but also emerge as a global leader in sustainable energy innovation.
This journey will require bold leadership, collaborative governance, and public-private innovation. But the rewards—a cleaner environment, stronger economy, and energy security—are well worth the effort.
