The rate of growth of power demand in India, which clocked an impressive 8.4 per cent y-o-y in last calendar year, is expected to decline to 6.8 per cent and 6.1 per cent in 2023 and 2024, respectively.

According to the latest report by the International Energy Agency (IEA), the strong post-pandemic recovery, combined with intense heat waves, drove electricity demand up by 8.4 per cent in 2022.

“We expect the strong growth trend to continue in 2023, at a rate of 6.8 per cent. Growth of 6.1 per cent is forecast in 2024, by when India’s electricity consumption is expected to surpass that of Japan and Korea combined,” the report added.

The rapidly increasing demand in India will continue to be driven by an uptick in household appliances, a rise in electrical machinery usage, an increase in electric vehicles, and further expansion in cooling systems.

Power generation

The IEA report pointed out that India’s coal-fired generation recorded a 3.8 per cent increase in H1 2023, boosted by strong demand growth amid reduced hydro power output (fell by 8 per cent).

With heat waves expected to cause surges in peak demand due to increased cooling, the government ordered coal plants to run at full capacity from March 16 to September 30 2023 to increase security of supply. This order is expected to especially affect coal plants that use imported coal and were not operating at full capacity, it added.

“Solar generation also increased strongly in H1 2023 by 26 per cent compared to previous year. We forecast coal-fired generation in India for the full year to increase by 4.2 per cent, and to continue its increase in 2024, albeit at a slower pace of 2.5 per cent, as renewables and nuclear are expected to expand significantly to meet a higher share of the growing electricity demand,” it added.

Power deficit

The report said that the Central Electricity Authority’s (CEA) Load Generation Balance Report 2023-24, published in March 2023, estimates that sub-regions in India may face power supply deficits ranging from 4 per cent to 11.3 per cent of their respective peak demand.

However, as each region is expected to experience its peak demand at different times, power imports and exports between regions would allow for some balancing, it added.

“The country as a whole is expected to have a surplus of only 0.7 per cent to meet the peak electricity demand (estimated at around 230 gigawatts), indicating a tight supply situation,” the report projected.

India has installed significant solar generation capacities in recent years, which helps meet daytime peak demand for cooling. However, evening peaks when the sun does not shine but temperatures remain very high pose a significant challenge to the system.

In such evening hours, the sufficient availability of dispatchable capacities of hydro, coal- and gas-fired power plants becomes crucial.

“New generation capacity additions in recent years have lagged behind the increase in peak power demand, leading the Ministry of Power in June 2023 to issue guidelines for Resource Adequacy Planning Framework for electricity to ensure that generation capacity is added at a pace matching growth in demand,” it said.

A new tariff scheme was also outlined, which introduces varying time-of-day tariffs between solar hours, normal hours and peak hours to incentivise the shifting of demand from the evening to daytime. The new tariffs are to come into effect during 2024 and 2025, it added.

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