India’s electricity challenge goes beyond adding more renewable energy

On 13 October, Ghanshyam Prasad dropped a bomb.

Speaking at an event organised by the Indian Chamber of Commerce, the chairperson of the Central Electricity Authority (CEA) said India needs more thermal power plants than previously estimated. Instead of adding 97 GW to the country’s existing 230 GW of coal-fired power plants, he said, India would need to add “up to 105 GW or even 150 GW”.

Blame it on the 2026 El Niño. Between weak rains and high temperatures, India has seen high electricity demand but low hydel-power generation this year. Given the resultant gap between demand and supply, coal stocks have run low at thermal plants; some states have seen power cuts; others have bought power at exorbitant rates. Tamil Nadu, for instance, paid Rs 37/unit during this year’s atypically hot October.

This turmoil has pushed the CEA into a rethink. Just this March, it had said India’s peak power demand would rise from the current 270 GW to 459 GW in 2035. To meet this demand, it said, India’s installed power capacity would need to double from today’s 555 GW to 1,121 GW. Much of this increase, it also said, would come from renewables. Coal’s share in our energy mix would drop from today’s 42.9% to 28%.

Also Read: What’s next for India after the Renewable Boom?

Peak electricity demand and Overall electricity requirement over the years. (Source: Niti Aayog, CEA, Visuals: Arkatapa Basu)

 

Now, given Prasad’s new numbers, coal’s share will be 33%. In absolute numbers, India will see an increase of anywhere between 38%-65% (97 GW-150 GW) in thermal capacity.

Hardwired into these numbers is a larger phenomenon. Across the globe, affected by both global warming and decarbonisation, electricity grids are in turmoil. “Between climate change and renewables, countries can now predict neither demand nor generation,” said Santosh Khatelsal, who used to oversee Enerparc’s solar operations in India.

Take India. This year, between low rainfall and high temperatures, power demand has risen faster than expected;  Night-time temperatures have climbed steeply as well; and hot conditions have persisted beyond July into September. At the same time, given the nature of renewable energy, electricity supply has been unpredictable too.

At the same time, given low support for the global electrification agenda, like other developing countries, India too faces a difficult task: getting electricity to more people and using it to power more of its economy without adding to emissions. International finance, technology and cooperation could help India make progress on these fronts, especially where the costs and risks are difficult for domestic institutions to bear alone. However, the country’s ambition to become an electro-state runs up against a persistent challenge: its continuing reliance on coal to meet rising power demand.

For this reason, India is a good place to study electrification in the absence of support. As CarbonCopy earlier reported, the country’s renewable energy expansion has outpaced parts of the system needed to use it, leaving projects waiting for power purchase agreements and transmission connectivity. The next phase of the transition will also depend on storage, closer coordination between generation and grid planning, and power markets that can respond to changing demand.

The resulting bind — when both demand and supply are at the mercy of nature — is drawing the CEA to coal-fired power. “Demand is something that India cannot control,” said Khatelsal. “Supply, however, can be managed with generation that can be controlled.”

Thermal power, however, comes with its own questions. At a time when climate change is intensifying, can India add to its emissions? What about the accompanying forest losses? 

In October, as the world prepared for COP31, CarbonCopy took a closer look at these questions.

How climate change is affecting India’s grid

India’s electricity demand is best understood as a sine wave that rises and falls every day — but rises over the years.

Till about 20 years ago, this graph was predictable. As households switched on their lights at night and, after meeting industrial demand, electricity flowed to farms, it peaked at night. Given greater demand for cooling, it also surged each summer. 

Much of that has changed now. Working on this report, CarbonCopy compared hourly demand numbers for two years — 2026 and 2017.

 

Fast-forward to 2026 and these numbers look very different.

Apart from the obvious increase in power demand, the intraday gap between minimum and maximum demand has widened. In tandem, each day now sees two peaks in power demand, one in the day and the second at night.

There are other changes. Power demand now stays high till September.

The reasons are well-known. Cooling demand at night-time has risen. “With more penetration of solar energy during the day, non-essential loads are being shifted to daytime, coinciding with industrial and commercial loads, which resulted in higher peak load during the daytime,” according to Grid India’s All India Demand Pattern Analysis report. “The demand in September points to the growing influence of factors beyond daytime temperature, including humidity, that can prolong cooling needs, and deficient rainfall that can increase irrigation demand while reducing hydropower generation,” wrote Down To Earth.

In addition, the grid also faces challenges due to decarbonisation. The intermittency of renewable power is one. In 2025, voltage spikes at a solar plant knocked out Spain's entire grid. In India, so much solar power is being generated that it almost goes-a-begging in daytime hours. 

A large question lies here. It has been argued that India is switching from a petro-state to an electro-state. To make such a transition, the country will also need to create a climate-resilient grid. What will it take to create one?

Also read: India's Renewable Energy Policies Offer Model for Emerging Markets: Global Report

Wanted: A climate-friendly grid

Such a grid would respond swiftly to demand while keeping emissions low. Get into the details, however, and this picture gets complicated very quickly. 

The day-time peak is one starting point. “Solar will produce from 6:30 to 6:30,” a senior executive at POSOCO (now known as the Grid Controller of India) had told CarbonCopy back in 2024. “If we can schedule the load such that the grid can absorb this supply, most of our problems are solved.”

To do this, he had said, India should shift load that is not time-dependent (battery charging, agriculture, etc.) to solar hours. For these hours, he said, the country might even have to suppress generation from thermal plants. As this load shifts, India will mainly see cooling demand at night — projected at 180 GW by 2035 from air-conditioners alone. To meet this demand, the country could fall back on hydel, pumped storage, batteries or ramp up thermal generation.

A clutch of factors, however, makes it hard for India to make these changes. 

1. Sheer size: Even though the country is adding renewables at a brisk rate and renewable ‘round the clock’ bids are now producing cheaper power than coal-fired plants, the country might be too big to rely solely on renewables. 

“Given India's growth rate — targeted and actual — we do not have the luxury of either/or in our energy sources,” said Sandeep Hasurkar, an investment banker and renewable energy expert. “Given volatility in oil/coal imports, prices and foreign exchange rates, domestic thermal has to be maximised to whatever possible extent… even as the country manages its long-term strategic transition to predominantly solar/wind plus battery.”

India’s renewable energy choices— more ground solar than rooftop — have complicated matters further. “We are a land-scarce country,” said PV Ramesh, who has worked as Chief Secretary to the Jagan Mohan Reddy government in Andhra Pradesh as well as headed REC (Rural Electrification Corporation). With ground solar needing to displace the poor and threaten their livelihoods, solar capacity addition will slowly get harder. 

Hydel is much the same. “India’s hydel potential has been exhausted in South India,” he said. “There is room for fresh dams in the North East and Kashmir, but there, many MoUs have been given to private firms that have not even begun work.”

2. Grid management: In this world with a changing climate, matching electricity demand and supply is not easy. “Weather calculations cannot be deterministic,” said Khatelsal. “They can only be probabilistic. No one knows where the tip will be. You can only see the short-term picture and project demand for the next ten or so days.” 

Discoms have to drive this response. They have to, as IEEFA wrote last July, “schedule generation more efficiently, reduce over-reliance on coal during peak hours, and optimise the use of energy storage and demand-side resources”. The question is: Do they have the capability?

For four reasons, the answer is “no”. 

First. To respond swiftly to changing demand, discoms should have their own power plants. However, once the 2003 Electricity Act opened up power generation to private firms, discoms’ generating capacities have frayed. 

“Today, all the generating projects coming up are owned by the private sector,” said Ramesh. “The State has stopped investing. And whatever old plants they have are being closed.” This is a problem. “Since they do not have generation of their own, discoms are dependent on a few companies,” he said. “This makes coordination very hard.”

Second. In multiple states, decisions about power procurement are now being taken in the Chief Minister’s Office. Jagan Mohan Reddy, for instance, inked the Power Purchase Agreement (PPA) between Andhra Pradesh and the Adani Power-Azure Power solar project in Gujarat. As these functions move to the CM’s office, discoms’ planning capabilities have frayed as well.

Third. Discoms’ financial capabilities have collapsed as well. This remains unaddressed at the time discoms need to invest in storage and resilience. As a former Grid Controller of India (GCI) official told CarbonCopy, his organisation cannot summon up all the balancing power that is needed. “If we have a grid with 520 GW and 160 GW is suddenly gone, states need to create storage/grid backup within their own administrative areas. They will have to ramp up domestic storage.”

Between frayed financials, low management capacity and the rising cost of power — which is what will happen when power producers make distribution companies compete with data centres for electricity — it’s unclear if discoms can make such investments in infrastructure and grid management technologies. 

“Their capacity to invest will go down,” agreed Ramesh. “And then, they will transfer that cost to REC, which means its capacity to invest in the grid will go down as well.”

Apart from these, there are other problems. India, as infrastructure expert Sharmila Chavaly has written, is adding RE capacity "faster than the grid can absorb it, and the inherent variability of these sources is straining the real-time stability of the grid system itself". In other words, India needs to invest more in transmission. Or take grid balancing. India needs batteries. But between China imposing export restrictions, India slapping import tariffs to boost domestic manufacturers, and simultaneously underfunding R&D into the emerging segments which do not need critical minerals (like Sodium Ion Batteries), there is a battery shortage. 

“The problem is no one has taken a serious view of the energy sector,” said Ramesh. “No one has looked at all the interconnections here.”

Given the intractability of such problems, India is falling back on Supply side augmentation. Back in 2003, academic Rohan D’Souza had critiqued India’s approach towards water management, saying it relied more on supply-side interventions (like building large dams and interlinking rivers) over demand management approaches (like changes in cropping patterns) in its bids to fix water scarcity. 

That applies to India’s electricity policy as well. Here too, planners have relied more on supply-side augmentation than demand management. “It’s easy to set up a power plant,” said Dr MR Anand, a former economic advisor to the Ministry of Coal. “It’s harder to deal with consumption, efficiency of design and so on.”

Much of this is a comment on state capacity. The Indian State is better at rolling out large, centralised construction projects than at enforcing — on the ground — the smaller tweaks needed for demand-side management and better planning. 

How to build a grid for the future

And so, the old question: How does India create a climate-resilient grid?

There are some things the country can do on its own. It should, said Ramesh, should get rid of import tariffs on batteries. It should also take a relook at its hydel potential and give stranded projects to NHPC and NTPC. It should also free up its discoms — and then invest in them. “Unless governance improves, unless political control reduces, we cannot fix this,” he said. “Privatisation is not the answer. Wider participation and scrutiny is the answer. And so, discoms should be listed. They will then be under scrutiny and insulated from the government.”

Apart from these, he said, for the sake of better coordination between thermal and renewable power, India needs to merge the Ministry of New and Renewable Power with the Ministry of Power. The country also needs more flexible power contracts. “All contracts need not be for 24x7, over 25 years - they can be for shorter durations and for specific months or specific times of the day,” said Ashok Sreenivas, a researcher with Pune’s Prayas Energy Group. 

“Such contracts are slowly emerging, though there are challenges to be overcome. The role of markets is also interesting, and they (instruments like the day-ahead market) can act as a buffer for short variations.”

Such models are being put into work in Germany, added Khatelsal. “German utilities who distribute power have contracts with gas-based power generators,” he said. “They subsidise for the installation/capital cost of the entire facility but use the power purchase agreements only for a few hours a day or short periods of time when there is a mismatch between generation and demand. As gas power plants can be started and stopped quickly, once the fixed costs are compensated, such PPAs can also provide a solution.” For this, however, as Ramesh had said, Indian discoms need to invest in their own generation.

There is also demand management. This runs deeper than just shifting load to solar hours. India needs more energy-saving devices, offices and housing. And yet, given a weak push, just 3% of Indian households have installed energy-efficient ceiling fans. Similarly, raising an AC’s temperature by 1°C can save 6% energy and setting it at 24°C instead of 20°C can reduce usage by 24%.

It has also been oft-repeated that India needs to green its habitations to bring down ambient temperatures and cooling needs. It should also reconsider the mushrooming of energy-guzzling data centres. Through such means, it can reduce the installed capacity it needs.

Apart from these, the country – like all developing countries – also needs greater international finance (to invest in state-owned generation and transmission), technology (be it for grid management) and cooperation (R&D into battery storage and other renewable technologies) to progress on these fronts. 

Hardwired into all these questions is the final answer to how much thermal India needs. 

Otherwise, the costs will run high. As Chavaly has written: “An unbalanced transition which fails to integrate firm, clean power could actually lock the country into coal-based generation as the default backup, compromising climate goals.” 

With that, the country also runs the risk of rolling backwards. In recent years, India’s power-sector emissions have not risen in step with electricity demand. An analysis by the Centre for Research on Energy and Clean Air (CREA) found that emissions from the sector remained flat in the first half of 2026 compared with the first half of 2024, even as electricity demand increased. The finding points to the contribution of clean energy to India’s power supply. 

The question is: how do India – and other developing countries – build on these foundations. 

 

[Edit: Bhasker Tripathi Shawasta Kundu Chaudhuri, Production: Arkatapa Basu]