India’s power demand surges amid scorching heatwaves, with CRISIL forecasting a 6-7 per cent rise to 1,810-1,830 billion units in FY27 as El Niño threatens hotter, drier conditions and strains the energy grid.

India’s electricity sector has witnessed an unprecedented spike in consumption, driven by an intense and prolonged heatwave that gripped much of the country in May 2026. According to a CRISIL Intelligence report, power demand jumped 11.2 per cent year-on-year to 165 billion units (BU) in May, while peak demand hit a historic 271 GW on May 21 – nearly 10 per cent higher than the previous fiscal’s peak of 245 GW.

Regions in northern, northwestern, western, and central India experienced temperatures 1-4°C above normal, with places like Uttar Pradesh’s Banda recording a scorching 48.3°C. This extreme weather fuelled a massive increase in cooling demand from air conditioners, fans, and other appliances, particularly in residential and commercial sectors. Manufacturing activity also contributed, as the Purchasing Managers’ Index (PMI) rose to 55.0 in May, reflecting robust industrial output. Industrial and commercial consumers together account for nearly 50 per cent of India’s total power demand.

For April-May combined, demand grew 7.6 per cent year-on-year, rebounding strongly from a low base in the prior period. This surge underscores the growing weather sensitivity of India’s power consumption, exacerbated by rising incomes and increasing penetration of energy-intensive cooling devices.

Supply Response and Market Pressures

To meet this elevated demand, power generation ramped up significantly, rising nearly 12 per cent year-on-year to 178 BU in May. Coal-based generation, the backbone of the system, increased 12 per cent and accounted for about 68.25 per cent of total output. Renewable energy (RE) generation grew around 20 per cent, supported by 7.4 GW of new capacity additions (including small hydro) in the first two months of FY27. Hydro and nuclear also saw gains of 11 per cent and 4 per cent, respectively.

However, the strain was evident in fuel logistics and markets. Coal inventories at thermal power plants fell to 49 million tonnes (MT) by end-May from 60 MT a year earlier, with stock levels dropping to 16 days from 21 days. Daily coal requirements rose to 3.10 MT. In short-term power markets, real-time market (RTM) volumes increased 15.9 per cent to 5,529 million units, while average market clearing prices rose 21.1 per cent to Rs 4.16 per unit. Day-ahead market prices climbed similarly.

These dynamics highlight both the system’s responsiveness and its vulnerabilities, particularly the continued heavy reliance on coal despite rapid renewable energy growth.

El Niño to Amplify Challenges in FY27

Looking ahead, CRISIL projects power demand to grow 6-7 per cent year-on-year in FY27, reaching 1,810-1,830 BU. This forecast is heavily influenced by the anticipated emergence of El Niño conditions from July 2026, which is expected to bring higher temperatures, reduced rainfall, and prolonged heat spells – further boosting cooling needs across households, businesses, and industries.

El Niño, characterized by warmer-than-average sea surface temperatures in the equatorial Pacific, typically weakens the Indian monsoon. Forecasts from the India Meteorological Department (IMD) and global agencies suggest a high probability of below-normal rainfall in 2026, potentially leading to drier conditions, agricultural stress, and sustained power demand pressure. Historical patterns show El Niño years often correlate with deficient monsoons, impacting hydropower and increasing dependence on thermal sources.

This weather outlook arrives as India’s power sector navigates a broader transition. The country has made impressive strides in renewables, with non-fossil fuel capacity surpassing fossil fuels in recent milestones. Yet, integrating variable RE sources like solar and wind remains challenging due to grid flexibility constraints, curtailment issues, and the need for substantial storage and transmission upgrades. Coal plants often operate at minimum technical loads to accommodate solar peaks, sometimes leading to RE curtailment.

Broader Context: Growth, Transition, and Risks

India’s electricity demand has been on a structural uptrend, fuelled by economic expansion, urbanization, and electrification. Peak demand has climbed dramatically in recent years – from around 200 GW in earlier periods to the current records – reflecting both development gains and climate vulnerabilities. The government aims for ambitious targets, including significant renewable energy capacity additions toward 500 GW non-fossil by 2030, but short-term realities demand a balanced approach with reliable baseload power.

Challenges persist: Distribution companies (DISCOMs) face financial pressures, land and evacuation bottlenecks slow projects, and extreme weather events test infrastructure resilience. Power cuts have been reported in some areas during peak heat, underscoring the need for enhanced grid modernization, demand-side management, and energy efficiency measures, such as guidelines for AC temperature settings.

On the positive side, recent capacity additions and policy pushes have helped meet demand without nationwide blackouts, a marked improvement from past vulnerabilities. Continued investment in battery storage, hybrid RE projects, and coal plant flexibility will be crucial for managing future peaks, experts say.

Implications for Economy and Policy

The power surge carries wider economic ramifications. Higher electricity prices in spot markets could raise costs for industries, while coal inventory pressures might affect supply chains. For agriculture, a weaker monsoon risks lower output and higher food inflation, indirectly influencing power use in irrigation.

Policymakers face a dual imperative: ensuring energy security amid volatile weather and accelerating the clean energy transition to meet long-term climate goals. Experts emphasise the need for better forecasting, diversified supply, and consumer awareness to mitigate demand spikes.

The CRISIL report suggests that as India powers through this “hot streak,” the coming months under El Niño will serve as a critical test of the sector’s preparedness. Sustained 6-7 per cent demand growth in FY27 could drive further investments but also highlight the urgency of building a more resilient, flexible, and sustainable power ecosystem.