Spot electricity prices in India witnessed a significant decline of 22 percent in May 2025 compared to the same month last year, as per data released by the Indian Energy Exchange (IEX). The decline has been primarily attributed to a fall in electricity demand triggered by unseasonal rains and the early arrival of the monsoon in several parts of the country.

According to the IEX statement, the Market Clearing Price in the Day Ahead Market (DAM) stood at ₹4.12 per unit in May 2025, down from ₹5.28 per unit in May 2024. The Day Ahead Market, which allows participants to purchase or sell electricity for delivery on the next day, is a crucial barometer of real-time demand and supply dynamics in the country’s electricity sector.

The exchange noted that the cooler weather conditions due to unseasonal rainfall in northern and central India, along with the early onset of monsoon in southern regions, led to a noticeable dip in peak power consumption during the month. This in turn reduced the price pressure on the exchange.

Despite the drop in prices, the IEX recorded a healthy increase in trade volumes. The total volume of electricity traded across all market segments on the IEX in May 2025 rose to 9,370 million units, marking a 12.5 percent year-on-year growth. This suggests that while demand moderated, market participation and liquidity remained strong, possibly due to lower prices attracting more buyers.

Segment-wise, the Day Ahead Market (DAM) saw a volume of 4,812 MU (million units), whereas the Real Time Market (RTM) recorded 2,374 MU, reflecting the increasing popularity of real-time power balancing mechanisms among utilities and large industrial users. Additionally, the Term-Ahead Market (TAM) and Green Market segments also contributed to the overall growth in volumes.

Renewable energy participation also remained significant, with several states increasing their purchase of solar and wind energy through the Green Term Ahead Market (GTAM). The GTAM contributed over 320 MU during the month, showing increased focus on sustainable energy procurement despite seasonal fluctuations.

Experts believe that this decline in spot electricity prices provides some relief to power distribution companies (discoms), many of whom are grappling with financial stress and rising input costs. Lower spot prices reduce the cost of power procurement and can help stabilise the discoms’ finances temporarily.

However, sector analysts also cautioned that these price trends may not last long. With the summer peak season likely to intensify in June and July, particularly in regions where the monsoon has not yet fully set in, electricity demand is expected to rise again, which could result in upward pressure on spot prices.

IEX noted that the platform continued to see robust participation from 55+ discoms, open access consumers, and generators, reaffirming its role as the premier energy trading platform in the country. The exchange also emphasised its focus on innovation and expansion, including the ongoing development of long-duration contracts and integration of battery energy storage systems (BESS) into market design.

India’s overall power demand during May 2025 remained slightly subdued compared to earlier projections by the Central Electricity Authority (CEA), owing to the cooler climate. However, with economic activity remaining strong and industrial output steady, power consumption is expected to rebound quickly in the coming weeks.

In conclusion, the sharp 22 percent fall in spot electricity prices in May highlights the direct impact of weather patterns on energy markets. As India transitions to a more weather-sensitive and renewable-intensive power grid, exchanges like IEX will play a key role in providing price discovery, flexibility, and balance between buyers and sellers.

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