By Anujesh Dwivedi
The all-India peak power demand in FY26 is expected to be 277 GW. Though 33 GW of power generation capacity was added in FY25, taking installed capacity to 475 GW, most of it comes from renewable energy sources, which is variable and diurnal in nature, explains Anujesh Dwivedi
Electricity consumption trends
India’s power sector has seen rapid growth, with economic growth propelling power demand to record highs each year. Between 2005 and 2022, per capita electricity consumption doubled from 631 units to 1255 units, making India world’s third largest electricity market. In FY25, India consumed 1,694 billion units of electricity, an increase of 33% over FY21, translating into a 5-year CAGR of 7.4%. In contrast, the 5-year CAGR of global power consumption was just 0.9% between 2020 and 2024, as per International Energy Agency (IEA) estimates.
Further, India witnessed its highest ever peak demand of 250 GW in May 2024. The pace of rise in peak demand also witnessed a jump. While it took six years for peak demand to go up by 50 GW, from 150 GW in FY16 to around 200 GW in FY22, it took just three years thereafter to reach 250 GW. As per the 20th Electric Power Survey (EPS) of the Central Electricity Authority (CEA), the peak power demand is set to touch 334 GW and the electrical energy requirement is expected to reach 2,279 billion units in FY30.
What is fuelling the demand for electricity?
Rapid economic expansion and rising temperatures during summer months have led to increase in demand for electricity. India has also experienced a notable rise in temperatures over the last decade, with 2024 being the warmest year on record since 1901. As per IEA estimates, the contribution of air-conditioners in total peak demand of the country was approximately 60 GW in 2024. This is expected to increase to one-third of the peak demand by 2030.
Going forward, increased focus on manufacturing, rise in commercial real estate (including global capability centres with their expansive, power-guzzling workspaces) and higher penetration of residential end-use appliances coupled with the emergence of new-age loads such as data centres, electric vehicles and green hydrogen (produced using electrolysis of water with electricity generated by renewable energy) shall further drive electricity consumption upwards.
What about this summer?
As per the mid-term review of the CEA’s 20th Electric Power Survey, the all-India peak demand is expected to be 277 GW in FY26, an increase of 27 GW from the previous year. In FY25, India added 33 GW of additional power generation capacity, taking installed capacity to 475 GW. This addition has almost entirely come from renewable energy sources, which is variable and diurnal in nature.
To meet any sudden increase in demand during summer, instructions have been given to Imported Coal-Based (ICB) power plants to operate at full capacity. These directions were in place from May 2022 till June 2024. The Electricity (Late Payment Surcharge and Related Matters) Rules 2022, had also been amended to encourage power generators to run their plants up to their full tied-up capacity and offer any un-requisitioned surplus in power exchange, instead of backing down. Efforts are also made to minimise planned maintenance shutdowns of plants during summer.
Preparation for the long run
CEA’S report on Optimal Generation Mix 2030 estimates that India shall need 777 GW of installed power generation capacity by 2030, with 64% of it coming from non-fossil fuel based sources. It has issued resource adequacy guidelines to ensure that power distribution companies tie up sufficient power generation capacities to meet growing demand. To compliment the increase in RE based generation and replace the retiring fleet of coal plants, 80 GW of thermal capacity addition by 2032 has been planned. In FY24, Coal India produced 774 million tonne (MT) of coal, a 10% growth over the previous year which has further moved up to 781.1 MT in FY25. Steps are also being taken to boost coal production.
Electricity prices on the exchanges
To meet power demand-supply deficits in the short-term, power distribution companies procure power from electricity markets/ exchanges. As demand increases in summer months, the Market Clearing Prices (MCP) on the exchanges also rises. While monthly weighted average MCP was Rs 3.89-4.29 per unit during August to December 2024, it crossed Rs 5.00 per unit during the summer months of April to July (~ 25% increase), even going above Rs 6.50 per unit during some days of June.
The writer is partner, Deloitte India.
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