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India’s Power Demand Growth Seen Moderating to 1.5–2% in FY26 Amid Extended Monsoon

India’s electricity demand is expected to grow by 1.5–2 percent year-on-year in FY26, significantly lower than the earlier projection of 4.5–5 percent, as early and prolonged monsoon conditions dampened power consumption across key months, according to industry estimates.

Power demand weakened during the peak summer period (April–June) after rainfall in early May led to cooler temperatures, reducing cooling-related electricity usage. The impact of sustained monsoon conditions continued to weigh on demand during subsequent months.

According to POSOCO data, electricity demand rose 5.5 percent year-on-year during the first ten days of December 2025, reversing a 0.6 percent decline recorded in November 2025. Commenting on the trend, Ankit Jain, Co-Group Head – Corporate Ratings at ICRA, said that while seasonal recovery is visible during the winter months, overall demand growth for the year is expected to remain modest due to the prolonged monsoon and a high base effect.

Despite subdued demand growth, generation capacity additions have accelerated. India added 29.8 GW of net generation capacity between April and October 2025, more than double the capacity added during the same period last year. The increase was largely driven by renewable energy projects commissioned ahead of the expiry of transmission charge waivers. Full-year capacity additions are projected at 45–50 GW, well above FY25 levels.

Coal availability remained stable, with inventories at power plants rising to 16.1 days as of December 12, compared to 15.8 days at the end of November. Stock levels remain close to normative benchmarks despite monsoon-related supply disruptions, although some state utilities continue to face localized shortages.

On the pricing front, spot electricity prices on the Indian Energy Exchange (IEX) averaged Rs 3.8 per unit as of December 12, up from Rs 3.1 per unit in November, but still marginally lower than December 2024 levels, continuing the year-on-year decline amid improved supply conditions and muted demand.

Consumption Trends Remain Weak

India’s energy consumption declined year-on-year to 132 billion units (BU) in October 2025, while November consumption fell around 1 percent to 123.4 BU. The September quarter of FY26 also saw moderation in electricity usage.

According to IEX, cumulative all-India electricity demand stood at 449 BU in Q2 FY26, reflecting a 3.4 percent year-on-year increase and a 0.8 percent quarter-on-quarter rise. Higher hydro and wind generation, combined with sustained coal-based output, led to increased supply liquidity on power exchanges.

This oversupply resulted in a sharp decline in market prices. The Day-Ahead Market (DAM) clearing price fell 12.5 percent year-on-year to Rs 3.93 per unit in Q2 FY26, while Real-Time Market (RTM) prices dropped 16.1 percent year-on-year to Rs 3.51 per unit. A similar trend was observed in the first quarter of FY26, with widespread rainfall suppressing summer demand and boosting supply availability.