Russia–Ukraine War Linked to Higher Electricity Costs in India, New Study Finds
New Delhi – September 21, 2025 – The Russia-Ukraine war considerably impacted risk premiums and volatility in India’s electricity market, driving up costs for consumers and businesses, according to a new study utilizing high-frequency data from June 2020 to April 2024. The research,sourced from the Indian Energy Exchange,establishes a direct link between the geopolitical conflict and increased electricity prices in the country.
The study, described as “first-of-its-kind,” reveals that increases in coal prices – exacerbated by supply-side uncertainty stemming from the war – initially drove up risk premiums.while subsequent price corrections offered some relief, a consistent “risk premium” remains in India’s day-ahead electricity prices, indicating consumers are willing to pay more to ensure a stable power supply.
“The increases in coal prices drove risk premiums higher by exacerbating supply-side uncertainty, while subsequent price corrections significantly reduced them. In India, day-ahead electricity prices are on average significantly higher than real-time prices resulting in a positive ‘risk premium’ thus indicating consumers are willing to pay extra to avoid supply uncertainty,” explained Prakash Singh, Associate Professor at the Goa Institute of Management, in a statement to PTI.
The research highlights that risk premiums are notably pronounced during peak hours (6-11 p.m.) and can surge by as much as 13% on weekends, signaling significant supply shortages.Both geopolitical risks and broader economic policy uncertainty were identified as contributing factors.
Researchers warn that India’s electricity markets are vulnerable to global turbulence and domestic supply constraints. Without rapid diversification of energy sources and improvements to market design, Indian consumers and businesses will continue to bear the brunt of volatility triggered by international events.
“Addressing these vulnerabilities now is key to ensuring energy security and affordability for the future,” Singh added.
Jalal Siddiki, senior lecturer at Kingston university and co-author of the paper, emphasized the need to move away from coal dependence and invest in renewable energy sources coupled with storage solutions.
The study also provides actionable insights for regulators to redesign electricity markets for greater efficiency and volatility management, and equips utilities with data to develop more effective hedging strategies. It underscores the importance of strategic reserves and flexible generation capacity to mitigate the impact of external shocks.
