Institutional Barriers to Renewable Power Exchange and Emissions Reductions: An India Case Study

Institutional barriers such as local generation preferences, purchase agreements, and regulatory restrictions on contracting costs can hamper the interregional coordination needed to maximize the benefits of variable renewables. Such nonphysical barriers prevent optimization of dispatch across multiple control areas. Previous studies either assume efficient trade subject to physical transmission and generation constraints, or simple $/MWh hurdle rates for trade profitability, without explicitly relating model parameters to specific institutional features that could be addressed by market reforms. Here, we propose a market model with explicit representation of institutional barriers. Drawing inspiration from the international trade literature, where trade across jurisdictions is distinguished based on the origin of commodities, we add institutional constraints to a standard unit commitment model. Applying this model to India, we demonstrate how barriers to interstate power flow impact operating costs, emissions, and renewable energy integration. We find that these constraints could increase India's annual bulk power operating costs by up to 29%, raise emissions by about 3%, and lead to renewable energy curtailment of more than 10% in some states. As India aims to increase non-fossil fuel-based capacity to 500 GW by 2030, addressing these inefficiencies is crucial.