Even as India's electricity demand increased in FY 2025-26, power costs on the exchange declined considerably. Data from the Indian Energy Exchange (IEX) show record traded volumes of 141 billion units this year, despite real-time market prices falling 14-16 percent year on year.
On the surface, the evidence appears counterintuitive. However, a broader look at supply conditions, renewables growth, market mechanics, and trading behaviour explains the conundrum.
Volumes increased across segments, especially in the Real-Time and Green markets. Despite a considerable decrease in prices. In Q4 FY26 alone, IEX reported a 24.3 percent YoY increase in traded electricity volumes.Why are prices softening?
Supply Growth Outpaces Demand Growth: In FY26, demand increased by only 1.1%, which is a moderate increase by historical standards. At the same time, India installed a whopping 55.29 GW of non-fossil capacity in FY26, led by solar and wind, marking the highest annual increase on record. Renewables now account for approximately 29 percent of total generation and half of installed capacity.

"As the Indian Energy Exchange reaches a record 141 billion units in FY26, the drop in power prices despite rising demand is not a paradox; rather, it represents a structural shift in how India's power market is evolving." A crucial driver is the rapid expansion of renewable energy, notably solar, which is generating large amounts of low-cost electricity. At the same time, improved grid management and stronger transmission networks are ensuring that this power is distributed more efficiently across regions. The increasing depth and liquidity of electricity exchanges also allows for more competitive and transparent price discovery. Simply put, the market is becoming more responsive, and supply is better aligned with real-time demand, resulting in fewer price spikes," said Kunal Maheshwari, Chief Growth Officer of Softlink Global.

Better Thermal Generation Back-Up: While renewables reduce marginal costs, coal-fired plants have better robustness: Improved coal stockpiles and logistics have resulted in fewer unscheduled outages. Thermal plants provide more predictable dispatch, reducing price spikes in the spot market.The rising involvement of distribution businesses (DISCOMs) in the spot market indicates that organisations are beginning to use more innovative purchasing strategies. Buyers employ competitive exchange pricing rather than entering into long-term contracts that oblige them to pay high rates. "The IEX platform improves market access and price transparency, allowing traders to discover prices and avoid tariff increases," stated Piyush Jhunjhunwala, Founder & CEO of Stockify.

Jhunjhunwala continued, "India's electricity market has moved toward greater market control and operational efficiency. The country achieves stable costs for expanding energy needs because different power sources, government regulations, and digital trading platforms collaborate to meet rising energy demands."
More Efficient and Transparent Price Discovery: Market maturity is represented in how prices are set, not just the amount traded. The increased engagement of DISCOMs and industrial purchasers in spot and real-time markets pushes procurement away from inflexible long-term contracts and toward competitive, exchange-based prices.

Furthermore, the depth across renewable, thermal, and real-time segments gives a more stable supply cushion, lowering price volatility. "The Indian electricity market is entering a period of plentiful supply and increased efficiency. While demand remains high, GDAM (Green Day Ahead Market) from renewables and improved thermal plant performance are outperforming it, resulting in periodic surpluses. The growing amount of solar and wind generation at lower prices is inherently lowering market clearing prices... This implies a shift away from capacity restrictions and toward optimisation, reinforcing the ongoing demand for hybrid solutions, grid preparedness, and cost-effective execution," said Srinivas Suthram, Senior Vice President, Kshema Power India.

Transmission and grid readiness improve integration: Upgrades to transmission infrastructure under the Green Energy Corridor program, as well as other grid expansions, have decreased bottlenecks.
Improved connectivity means:

1. Low-cost power may be distributed further and more efficiently.
2. Regional imbalances are less likely to cause localised price increases.
3. Structural Changes in India’s Power Mix
4. The share of thermal generation is expected to decrease below 70% next fiscal year, while renewables continue to rise by double digits.

India's power pricing dynamics on exchanges are shifting from one in which limiting thermal supply controlled pricing to one in which ample renewable supply, competitive auctions, and sophisticated trading mechanisms drive prices. Prices are declining not because demand is weak, but because supply has become more robust, diverse, and responsive.