India's power demand is projected to expand by up to 7 per cent year-on-year in FY27, reaching approximately 1,810–1,830 billion units (BU), driven by above-normal temperatures and reduced rainfall associated with the anticipated El Niño effect, according to a Crisil report released on 18 June. The findings underscore how deeply weather-sensitive India's electricity consumption has become as cooling demand surges across households, businesses, and industry.

Weather as the Primary Driver

Crisil's report highlights that electricity demand is likely to remain closely tied to meteorological conditions through the current fiscal year. Rising temperatures are expected to sustain elevated cooling requirements, while a below-normal monsoon linked to El Niño could limit hydro generation and keep thermal plants under pressure.

In May, power demand surged 11.2 per cent year-on-year to 165 BU, as large swathes of north, northwest, west, and central India recorded temperatures 1–4 degrees Celsius above normal. Uttar Pradesh's Banda district registered a peak of 48.3 degrees Celsius on 12 May, illustrating the severity of the heat event. For the combined April–May period, demand grew 7.6 per cent year-on-year — a sharp reversal from the 1.2 per cent contraction recorded in the same period of FY26.

Peak Demand and Market Prices Climb

Peak power demand touched 271 GW in May, nearly 10 per cent higher than the 245 GW peak recorded in FY26. The tighter supply-demand balance pushed up market prices: the average clearing price in the Real-Time Market (RTM) rose 21 per cent year-on-year to ₹4.16 per unit, while RTM volumes climbed approximately 16 per cent to 5,529 million units (MU). In the Day Ahead Market (DAM), the clearing price increased 18.3 per cent year-on-year to ₹4.8 per unit.

Industrial Activity Adds to Demand Momentum

Beyond weather, industrial recovery is contributing to the demand uptick. The Manufacturing Purchasing Managers' Index (PMI) edged up to 55 in May from 54.7 in April, signalling continued expansion. Industrial and commercial consumers collectively account for roughly half of India's total electricity consumption, making their activity levels a critical variable in the annual demand outlook.

Generation Rises, but Coal Stocks Tighten

Total power generation rose approximately 12 per cent year-on-year to 178 BU in May. Renewable energy generation led the growth at around 20 per cent, while coal-based generation grew 12 per cent and continued to account for over 68 per cent of total electricity output. India added 7.4 GW of renewable energy capacity — including small hydro projects — in just the first two months of the fiscal year.

However, coal inventories at thermal power plants tightened considerably, falling to 49 million tonnes at the end of May from 60 million tonnes a year earlier. Coal stock cover dropped to 16 days from 21 days over the same period, as daily coal requirements climbed in step with rising electricity demand. This narrowing buffer raises questions about supply resilience if the heat wave extends deeper into the monsoon season.