Impact of india’s energy transition on electricity prices: from thermal to renewables

Abstract

This study investigates the impact of the transition of thermal energy to renewable energy on electricity prices (wholesale price index) of India’s large-scale utility industry. India has set aside the goal of generating 500 GW of electricity from non-fossil fuel energy and achieving net-zero emissions by 2070. To attain these goals, various projects are being taken up by the government, such as the construction of solar parks and wind farms. But the impact of this transition on electricity prices is still unclear. This study examines the impact of transition using a monthly dataset and a state-wise dataset, and employs panel regression with fixed effect models. The findings show the existence of a negative relationship between the proportion of renewable energy to total energy generation, strongly justifying the hypothesis that an increase in the proportion of renewable energy to total energy generation has a negative relation with electricity price. Additionally, the findings show a positive relationship between the proportion of renewable energy to total energy generation, with installed capacity and energy demand, justifying other hypotheses. Residential electricity generation is out of the scope of this study. This study provides valuable insights by solely focusing on various factors related to renewable energy and the ones influencing electricity prices in India’s large-scale utility industry.