India’s Electricity Demand Growth and Future Projections

India’s electricity sector is experiencing unprecedented growth. The all-India peak power demand is projected to reach 277 GW in FY26. This surge follows increase in power generation capacity, primarily from renewable sources. The country is now the third-largest electricity market globally, with per capita consumption doubling over the past two decades.

Current Electricity Consumption Trends

India consumed 1,694 billion units of electricity in FY25. This marks a 33% increase since FY21. The five-year compound annual growth rate (CAGR) stands at 7.4%, higher than the global average of 0.9% during the same period. The peak demand reached 250 GW in May 2024, with a rapid increase in demand observed over the last three years.

Factors Driving Electricity Demand

Several factors contribute to the rising electricity demand in India. Economic expansion is a primary driver. Additionally, rising summer temperatures have increased reliance on cooling systems. The International Energy Agency estimates that air-conditioners accounted for approximately 60 GW of peak demand in 2024. This figure is expected to rise to one-third of the total peak demand by 2030.

Future Projections and Capacity Requirements

The Central Electricity Authority’s 20th Electric Power Survey predicts that peak demand will reach 334 GW by FY30. To meet this demand, the installed power generation capacity must increase to 777 GW. A portion of this capacity, 64%, is expected to come from non-fossil fuel sources. This shift necessitates a robust strategy for resource adequacy.

Renewable Energy and Thermal Capacity Additions

In FY25, India added 33 GW of power generation capacity, bringing the total to 475 GW. Most of this capacity is from renewable energy sources. However, to ensure reliability, the country plans to add 80 GW of thermal capacity by 2032. This strategy aims to balance the variability of renewable energy with stable thermal generation.

Electricity Pricing Dynamics

Electricity prices fluctuate based on demand-supply dynamics. During peak summer months, market clearing prices (MCP) rise . In June 2024, MCP exceeded Rs 6.50 per unit. This increase reflects the heightened demand and the need for distribution companies to procure power from exchanges to meet shortages.

Strategic Measures for Demand Management

To manage demand effectively, the government has instructed Imported Coal-Based (ICB) power plants to operate at full capacity during peak periods. Additionally, the Electricity (Late Payment Surcharge and Related Matters) Rules 2022 have been amended to incentivise power generators to maximise output. Planned maintenance of power plants is minimised during high-demand seasons.

Questions for UPSC:

1. Discuss the impact of rising temperatures on electricity demand in India.
2. Critically examine the role of renewable energy in India’s electricity generation strategy.
3. Explain the significance of the Central Electricity Authority’s projections for future power capacity.
4. With suitable examples, discuss the factors influencing electricity pricing in India during peak demand seasons.

Answer Hints:

1. Discuss the impact of rising temperatures on electricity demand in India.

1. Rising temperatures have increased the use of cooling systems, particularly air-conditioners.
2. In 2024, air-conditioners contributed approximately 60 GW to peak demand, projected to rise to one-third by 2030.
3. Higher temperatures lead to increased electricity consumption, especially during summer months.
4. The trend of rising summer temperatures has been consistent over the last decade, influencing demand patterns.
5. Heatwaves and extreme weather events further exacerbate electricity demand spikes during summer.

2. Critically examine the role of renewable energy in India’s electricity generation strategy.

1. India’s installed capacity reached 475 GW, with portion from renewable sources.
2. Renewable energy is variable and diurnal, requiring complementary capacity to ensure reliability.
3. Government policies favor transitioning to non-fossil fuel sources, aiming for 64% of capacity by 2030.
4. Renewables contribute to reducing carbon emissions and enhancing energy security.
5. However, reliance on renewables necessitates strategies for energy storage and grid management.

3. Explain the significance of the Central Electricity Authority’s projections for future power capacity.

1. The CEA projects peak demand to reach 334 GW by FY30, indicating a need for strategic planning.
2. To meet this demand, total installed capacity must increase to 777 GW, ensuring energy security.
3. The transition towards 64% non-fossil fuel sources reflects India’s commitment to sustainability.
4. Projections guide investment in infrastructure and resource allocation for power generation.
5. They also influence policy-making and regulatory frameworks to support capacity expansion.

4. With suitable examples, discuss the factors influencing electricity pricing in India during peak demand seasons.

1. Electricity prices rise during peak demand seasons due to increased consumption, especially in summer.
2. Market Clearing Prices (MCP) surged above Rs 6.50 per unit in June 2024 due to high demand.
3. Distribution companies often procure power from exchanges to meet shortfalls, impacting prices.
4. Seasonal fluctuations and weather patterns affect demand and pricing dynamics.
5. Regulatory measures, like amendments to the Electricity Rules, aim to stabilize pricing during peak times.