What Does Renewable Energy Curtailment Signal for India’s Power System?

Curtailment has quietly moved from being a technical term used by system operators to a public flashpoint in India’s clean energy debate. Renewable energy (RE) like wind and solar follows the principle of “use it or lose it”, wherein any unused intermittent RE is typically thrown away or curtailed. For renewable developers, this looks like wasted green power. For grid operators, it is often the only way to keep the system stable. Although both standpoints are justifiable, neither, on its own, explains what curtailment is actually signalling.

There are three issues around curtailment that need clarity. First, what are the causes? Second, what are the system-level operating and planning implications, and what alternatives exist? Third, what are the economic and policy implications?

The more important question is not whether curtailment exists, but how early it appears, how persistent it becomes, and whether it reflects unavoidable system limits or avoidable planning gaps

India is not alone in confronting curtailment. In 2025, several advanced power systems faced similar constraints, sometimes far more visibly. For example, Germany saw record levels of solar and wind curtailment in the first half of the year, amounting to 8% of solar output and 5.3% of wind generation. The United Kingdom spent over £1.4 billion compensating wind farms that were asked to shut down because the grid could not absorb their output. Even China, despite its scale and speed in building transmission, saw solar curtailment increase as capacity additions raced ahead of power evacuation.

Curtailment for grid security is standard practice worldwide and is embedded in India’s Grid Code. In this respect, Indian operators are doing exactly what system operators elsewhere do when faced with similar conditions. The more important question is not whether curtailment exists, but how early it appears, how persistent it becomes, and whether it reflects unavoidable system limits or avoidable planning gaps.

Clearer Rules, Hard Limits, and Inevitable Trade-offs

Recent changes to deviation settlement rules (scheduled vs. actual grid drawals) have helped clear one source of confusion. Over-injection of supply during high-frequency (ostensibly over-supply) conditions no longer attracts deviation charges in most cases. This reduces commercial uncertainty for generators, but clarity does not create physical capacity. Curtailment remains unavoidable when transmission corridors are constrained.

The economic discomfort around curtailment is sharpened by how responsibilities are allocated in India’s institutional framework. Load dispatch centres are legally required to ensure secure grid operations and are empowered to curtail generation when technical limits are reached. Generators are expected to comply immediately. Power Purchase Agreements (PPAs) often distinguish between technical curtailment (for grid security or transmission constraints), which is typically uncompensated, and curtailment for other reasons, which may attract compensation or deemed generation provisions.

Curtailment, therefore, reflects system-level trade-offs rather than any single failure.

Additional transmission can address some problems by shifting surplus generation to regions with demand. However, while transmission utilities are responsible for planning and building networks, delays in commissioning do not automatically translate into liability for lost generation. The resulting tension is predictable. Renewable generators can lose revenue even when they are not responsible for the constraint. At the same time, system operators are doing precisely what they are mandated to do, and transmission projects face long approval and construction timelines that cannot be shortened at will. Curtailment, therefore, reflects system-level trade-offs rather than any single failure.

Most power systems resolve this trade-off by accepting a limited amount of curtailment as a cost-effective alternative to building infrastructure for rare extremes. Annual curtailment of several percentages is widely considered normal. Often, curtailment is preceded by price collapse. India already experiences very low exchange prices in some time blocks. In Europe, price signals have gone further down, with negative prices appearing during a growing share of hours.

Why Curtailment Needs to Be Managed, Not Eliminated

System modelling reinforces this logic. Efficient renewable pathways typically involve some RE oversizing, with surplus energy curtailed during certain periods. This is cheaper than relying on storage to “end curtailment”. Storage isn’t just to use surplus RE; it also helps the system during periods of stress (along with many other benefits, including deferring capex investments).

Curtailment itself rarely has a single cause. Transmission congestion, equipment outages, low demand, forecasting limitations, and voltage or reactive power issues often overlap. Ageing transformers or repeated outages on high-voltage lines reduce effective evacuation capacity. Poor voltage profiles can constrain usable capacity even when thermal limits are not breached. From the perspective of a generator, the distinction between these causes matters little. The outcome remains the same.

The ultimate challenge is one of aligning RE supply to demand. In the short run, the supply–demand mismatch is primarily felt in high RE states, but it remains a national problem. Perfect (“infinite”) transmission spreads the problem out, but the national demand limitation will remain. Looking at aggregate (annual) data only shows the averages, but it is granular data (including by time of day) that can pinpoint specific bottlenecks and possible low-hanging fruit, like augmenting transmission between specific regions.

“Solving” curtailment will not mean ending it, but minimising it. Achieving this requires greater focus on the demand side, rather than thinking only of storage or the right type of RE alone. Demand flexibility is a missing ingredient in today’s mix and needs urgent attention.

Curtailment highlights where the grid is stretched and where operational caution reflects constraints that are sometimes fixable. The real concern is curtailment that appears early and persists even when RE remains a modest share of supply. This points back to planning choices and signalling, e.g., planning that ignores time-of-day variations rather than physical limits.

What India does with this information will matter more than any single year’s numbers (2025 had unusually low demand, which raised curtailment). If curtailment is treated as an exception, the same disputes will return again and again. Incorporating it into system modelling allows planning and policy to respond earlier and more effectively.

If we hypothetically assume that an optimal system has 10% curtailment, we will need a national curtailment policy that internalises this cost. This burden should not be borne by high RE states alone, nor should specific generators face the risk disproportionately.

One useful way to think about the next phase is to separate what can be done with new projects and what can realistically be expected of the existing fleet. New builds can be asked to do more, whether through tighter technical specifications, stronger reactive power support, or, over time, capabilities such as grid-forming behaviour and synthetic inertia. These requirements will raise costs and will therefore need to be examined and approved by regulators. For existing projects, the bar has to be different. Some retrofits may make sense where benefits clearly exceed costs, but they still require upfront investment that cannot be ignored.

Once more local issues are addressed, including equipment downtime and weak voltage control, the larger challenge remains: aligning supply with demand. If we hypothetically assume that an optimal system has 10% curtailment, we will need a national curtailment policy that internalises this cost. This burden should not be borne by high RE states alone, nor should specific generators face the risk disproportionately. From a purely operational perspective, curtailing specific plants may sometimes be a technically superior option, but it is not an equitable way to allocate economic risk. Moreover, with RE priced at zero at the margin, price signals alone cannot resolve this issue. Some separation between operational decisions and financial settlement will be unavoidable.

Curtailment is just one of many signals and outcomes of a modern grid. As previous CSEP research has shown, the first step should be transparency in measuring and accounting for curtailment by cause (technical and economic) and by location. Without this, we cannot devise the necessary financial mechanisms to manage both fixable and unavoidable curtailment.