The National Electricity Plan (2026), scripted by the Ministry of Power, brought in several new concepts that reflect modern thinking. One of the concepts introduced is ‘capacity markets’.
The Central Electricity Regulatory Commission (CERC) has followed up with a ‘staff paper’ on the subject and put it out for public comments.
The concept of ‘capacity markets’ could be somewhat confusing in India because the country’s two-part tariff system already compensates generators through fixed capacity charges.
Capacity vs energy
Generators under long-term power purchase agreements (PPAs) are currently compensated through the two-part tariff comprising a fixed capacity charge and a variable energy charge. In other words, the tariff includes an assured payment for the power plant, regardless of whether it runs or not.
