No sooner had he come to power in Andhra Pradesh, N Chandrababu Naidu released a series of white papers on the challenges which the State faced due to negligence of the previous regime. One such white paper was on the State’s power sector, which highlighted the immediate financial as well as infrastructural challenges.

Naidu had then said that his government was committed to providing quality, reliable and affordable 24-hour power supply to all domestic, commercial and industrial consumers, and nine hours daytime power to the farming community.

A few days back Naidu took to social media stating “#PowerPayBackInAP”. His tweet, translated into English, reads thus: “A key step has been taken to benefit electricity consumers in the State. For the first time in the history of the country, we are reducing the burden of electricity charges with a trough. I am happy to say that with this decision, electricity charges will be reduced in the State from November.”

“We have achieved this feat due to the good results achieved with the efficient management of the electricity systems in 15 months. Through the power swapping system with other States, we have checked the policy of purchasing electricity at high prices during peak demand. Power swapping has been useful in eliminating the need to purchase electricity at high rates in short-term purchases,” it said.

The tweet also spoke about other benefits which are being extended to consumers across categories in the State.

Power swapping

It definitely would cheer his vote bank. But, is it really the solution? Power swapping is not something new. What India needs is “ energy banking” as it moves towards green energy. Energy banking refers to a mechanism that allows excess electricity generated by renewable projects to be stored or “banked” with the grid for later use, providing financial benefits and grid stability.

Swapping in the power sector refers to several distinct concepts including power exchange agreements between States or utilities, grid congestion management strategies, and battery-swapping policies for electric vehicles. In the case of electricity grid swapping, it is an agreement between two utilities or States to exchange electricity to manage seasonal variations in supply and demand.

As Rajesh Kumar Mediratta, Managing Director and CEO, Indian Gas Exchange, and someone who has played a key role in developing power markets in the country, explains, “Swapping is agreeing that a State buys capacity (power) from the other State (relieving), of its share in an inter-State generating station. The share of one State, whose demand is low, is utilised by the other State which may be facing higher demand. By doing so, capacity charge and energy charges, for the share in ISGS, are paid by the buying State. This way, the buying State avoids buying costlier power from the market. And the relieving State also saves on capacity charge payment, since otherwise, it would have paid for capacity without using energy.”

Going by this explanation, the net result is that both States benefit — the costs for both come down.

However, M Venugopala Rao, convener, Centre for Power Studies, is of the view that “swapping of power between Discoms of different States cannot be economical, because it invariably imposes additional burden of inter-State transmission charges and losses.”

“The way out is to make prudent decisions while entering into power purchase agreements with different power plants, both conventional and non-conventional, to ensure harmonious balance between fluctuating demand curve and power mix of thermal, hydel and renewable energy to the extent technically practicable so as to avoid availability of unwarranted surplus or deficit,” he said.

“Once economical and sustainable battery energy storage system is developed and put to use to the extent required, it can show the way out to avoid high-cost market purchases, swapping and UI (Unscheduled Interchange) drawls,” he added.

While States and decision-makers are talking about swapping, why isn’t there enough push for “energy banking”? In fact, swapping will work better if there is banking.

According to former Power Secretary Alok Kumar, “there is an urgent requirement for capacity trading. You cannot keep idle capacity. The focus should be on that, rest all follows.”

According to information available, “In India, banking provisions have historically varied by State, with some implementing restrictive monthly banking and others allowing only daily or time-of-day banking, which can reduce the profitability of renewable projects by limiting the ability to save excess generation for future use, especially when a State has already met its renewable energy targets,” he said.

Storage capacity

As Vikram V, Vice-President, Co-Group Head - Corporate Ratings, puts it, “Given the significant growth expected in the share of renewables in the overall electricity generation in India to over 35 per cent by 2030 from 22 per cent in FY2025 and its intermittent nature of generation, there is a need to increase the energy storage capacity in the country.”

ICRA estimates the storage capacity requirement to be about 50 GW with 5-6 hours of storage by 2030. “This is expected to be met through a mix of battery energy storage and pumped hydro projects. This would allow the Discoms to store the surplus solar power generated during the day and use it for meeting the evening peak demand requirement, when solar is not available,” he said.

To ensure that the generated capacity doesn’t go waste, it is time for States and decision-makers to adopt a focussed approach towards energy banking.

Published on October 7, 2025