India’s power sector could be headed for another year of weather-driven demand pressure, with electricity consumption projected to rise 6-7% year-on-year to 1,810-1,830 billion units (BU) in FY27, after a severe heatwave pushed peak power demand to a record 271 GW in May, according to a Crisil Intelligence report.
“Power demand is expected to increase 6-7% on-year in fiscal 2027 to 1,810-1,830 BU, driven by higher temperatures and lower rainfall due to the expected El Niño effect from July 2026, resulting in a rise in cooling demand,” the report said.
The forecast comes after India recorded its highest-ever peak power demand of 271 GW in May, nearly 10% higher than the previous fiscal’s peak of 245 GW, as prolonged heatwave conditions boosted cooling requirements across large parts of the country.
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“May saw a peak power demand of 271 GW, ~10% higher than the 245 GW peak in fiscal 2026. This surge is attributed to increased cooling demand due to severe and prolonged heatwaves,” Crisil said.
Electricity demand rose 11.2% year-on-year to 165 BU in May, driven by above-normal temperatures across northern, northwestern, western and central India. Temperatures remained 1-4 degrees Celsius above normal, with Uttar Pradesh’s Banda touching 48.3°C on May 12, among the highest readings recorded during the month.
The report noted that manufacturing activity also supported electricity consumption, with the Manufacturing PMI rising to 55.0 in May from 54.7 in April. Industrial and commercial consumers account for nearly half of India’s total electricity demand.
For the first two months of FY27, electricity demand increased 7.6% year-on-year, compared with a 1.2% decline during the corresponding period of the previous fiscal, indicating a sharp turnaround in consumption trends.
The rise in demand translated into higher power generation across all major fuel sources. Total generation increased nearly 12% year-on-year to 178 BU in May, with renewable energy, coal, hydro and nuclear power all registering growth.
“Renewable energy generation increased around 20% on-year in May, supported by capacity additions during the first two months of the fiscal,” the report said.
Infrastructure Backstop
India added 7.4 GW of renewable energy capacity, including small hydro, during April-May, helping renewable generation expand at a faster pace than overall demand growth.
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However, coal continued to remain the backbone of the power system. Coal-fired generation rose 12% year-on-year and accounted for 68.25% of total generation in May, broadly in line with the FY26 average of 68.36%.
“Coal-based generation increased 12% on-year, accounting for 68.25% of total generation in May 2026,” Crisil noted, highlighting the continued dependence on thermal power to manage demand spikes and grid stability.
Market Strain
The pressure was also visible in short-term power markets. Real-time market (RTM) volumes increased 15.9% year-on-year to 5,529 million units (MU) from 4,770 MU a year ago, while the average market clearing price rose 21.1% to ₹4.16 per unit. Day-ahead market prices climbed 18.3% to ₹4.8 per unit.
Coal inventories at thermal power stations declined as utilities ramped up generation. Stocks fell to 49 million tonnes (MT) at the end of May from 60 MT a year earlier, while coal inventory dropped to 16 days from 21 days. Daily coal requirements increased to 3.10 MT from 2.90 MT, even as dispatches to power plants rose 1.22% year-on-year to around 74 MT.
The report said the expected emergence of El Niño conditions from July could keep electricity demand highly weather-sensitive through FY27, with cooling requirements continuing to drive consumption and placing sustained pressure on generation, fuel supplies and power markets.
TOPICSEl NinoThis article was first uploaded on June eighteen, twenty twenty-six, at ten minutes past eight in the night. © The Indian Express (P) Ltd