Study: Russia-Ukraine War, Coal Market Volatility Fueling India’s Rising Power Costs

Rapid Summary:

• A study by Goa Institute of Management and Kingston University found that day-ahead electricity prices in india are consistently higher than real-time prices,indicating a willingness among consumers to pay a ‘risk premium’ to ensure uninterrupted power supply.
• Key factors driving higher risk premiums include the Russia-Ukraine war, volatile coal markets, domestic demand patterns, and policy uncertainty.
• Risk premiums peak during late hours (6-11 p.m.) and rise further on weekends by up to 13%, highlighting critical supply shortages.
• Researchers emphasize that geopolitical risks, commodity price fluctuations, and lack of energy diversification heighten India’s vulnerability in the electricity market.
• Policy-makers are urged to address these challenges through market redesigns, energy diversification toward renewables with storage solutions, and strategic reserves for better resilience.

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Indian Opinion Analysis:
This study underscores the interconnectedness between global crises-like the Russia-Ukraine war-and local impacts on India’s electricity sector. The findings highlight vulnerabilities stemming from over-dependence on coal as an energy source amid volatile international conditions.Elevated risk premiums signal inefficiency in meeting domestic demand during critical hours despite high economic costs borne by households and businesses.

For India’s policymakers and regulators, this research provides essential guidance: diversifying power generation towards renewable sources paired with efficient storage systems can mitigate external shocks while ensuring long-term affordability and reliability of energy supplies. Thoughtful redesigning of electricity markets based on such actionable data could lead to more stability against future geopolitical or economic disruptions-a necessity for sustaining growth within an increasingly interconnected global framework.