India’s electricity demand has surged earlier than expected this year, with peak demand touching an all-time high of 256.1 gigawatts (GW) on April 25. (Record highs were recorded in the country on May 19 and May 20). About one-third of this peak demand was met through renewable energy (RE) sources. While the national grid remained operational without any reduction during solar hours, a reduction of 2% (4,243 MW) was observed in non-solar hours on the same day.
What is peak demand?
Peak demand refers to the highest point of electrical power consumed on the grid over a specific period, usually a 15-minute interval. While peak demand occurs at a single moment, it occurs during a 2 to 4 hour period of above average demand or ‘peak demand period’. During the summer months the temperature may remain elevated for longer periods from afternoon to evening and again during the night due to cooling load (from air conditioners and coolers). Similarly, winter extremes may last longer in the morning (between 6 am and 10 pm) and evening (between 6 pm and 9 pm), as heating and lighting loads increase during these hours, especially in northern states.
It is important to pay attention to the duration of these peaks because even though they only occur for short periods, the grid needs to meet the peak load immediately. In fact, the entire power sector infrastructure (generation, transmission and distribution capacity) needs to be planned to deal with this extreme. But this is easier said than done. Building a system to meet peak load periods that last only a few hours is neither resource-efficient nor economical. If enough capacity is built to meet peak demand, it will be underutilized during off-peak hours. On the other hand, if there is not enough capacity available to meet the peak demand, the system will face issues such as load shedding and grid instability.
How do states manage demand?
States meet demand through two mechanisms: contractual supply and power exchange purchases. Contractual supply involves long-term power purchase agreements (PPAs) that state distribution companies (DISCOMs) sign with power generators to ensure power supply for several years. This helps the discoms to meet the average demand of their consumers. About 85%-90% of the demand in India is being met through contractual supply or bilateral agreements between discoms and generators. In the event of anomalies in real time or when contractual supply is reduced due to sudden surge in demand or power plant or transmission failures, discoms turn to another mechanism – purchasing power from power exchanges. Currently, about 10%-15% of electricity is traded on power exchanges.
To manage peaks, states often take demand-side measures. While most states have relied on advice from consumers to reduce usage during peak hours, typically between 6 pm and 11 pm, Delhi has increasingly used measures such as time-of-day tariffs (electricity charges that vary depending on the time of day) and smart metering to flatten evening peaks that are driven by cooling demand.
What are the challenges faced by the states due to increasing demand?
India’s electricity demand is increasing due to household electrification, use of air conditioners, electric vehicle penetration and steady growth in agricultural electricity consumption. Over the last 5 years, the country’s peak demand has increased by 37% – from 183 GW in December 2020 to over 250 GW in April 2026. This increase has made it difficult for states to meet power requirements.
Since discoms are committed to long-term agreements signed at a fixed capacity and price, any shortfall has to be met through power exchanges, which are short-term markets. This causes states to face price volatility as prices increase in these markets during peak periods. Next-day market power prices have seen sharp increases during peak periods, with rates reaching the regulatory limit of Rs 10 per kilowatt-hour on several occasions during April and May this year, data from the Indian Energy Exchange shows.
Another challenge relates to the inadequacy of the distribution network. Infrastructure expansion and upgrading in India’s power distribution segment often lags behind demand growth, leading to problems in delivery of power to the end consumer. Over the past decade, India’s generation capacity has increased by 76% (from 303 GW to 532 GW), its transmission lines have expanded by 47% (from 3,41,551 circuit kilometers (CKM) to 5,01,766 CKM), and transformation capacity has increased by 115% (from 6,58,949 megavolt-amperes (MVA). to) 1,41,63,76 MVA). However, distribution infrastructure has not expanded commensurately, and distribution networks are facing great stress. Recent estimates by the Central Electricity Authority show that about 13 lakh distribution transformers (DTs) fail annually in India. Some states have DT failure rates as low as 2%, such as Kerala, while some (especially northern states) have DT failure rates as high as 20%. Additionally, last mile power delivery is being affected due to overloading of transformers and feeders, old equipment and inadequate maintenance. Many states experience local power outages, especially during peak demand periods, indicating that their distribution networks are operating close to their limits and need to be upgraded.
The challenge posed by the increase in demand becomes acute for economically stressed states as they are neither able to purchase expensive short-term power nor invest in distribution network upgrades. States like Uttar Pradesh and Bihar are struggling with high losses, aging distribution infrastructure and overloaded transformers.
How does RE help?
RE has become central to managing increasing electricity demand, especially during summer peak periods. Since the operating costs of solar and wind power plants are low, higher RE penetration can also reduce the overall power purchase cost for discoms.
States with high RE capacity, such as Gujarat and Karnataka, are able to comfortably meet daytime peaks as solar power generation aligns quite well with daytime commercial and agricultural demand. But these states face evening peaks after sunset, requiring them to increasingly rely on energy storage technologies such as Pumped Hydro Storage (PHS) and Battery Energy Storage Systems (BESS). Similarly, Tamil Nadu, with its high wind potential, benefits significantly from wind generation during the monsoon months, thereby reducing dependence on thermal power. But to meet the high evening urban demand the state has to resort to market purchases during periods of low wind generation.
However, Punjab, which has low RE potential and a major agricultural load during the paddy-sowing season coinciding with the peak of summer, has to rely heavily on hydropower imports and short-term market purchases.
What needs to be done?
Despite its growing contribution, RE cannot help in ensuring reliable power supply round the clock due to its intermittent and variable nature. Furthermore, electricity demand and RE electricity production are not always aligned. Solar energy production declines rapidly after sunset, although electricity demand often remains high in the evening. Similarly, wind generation is seasonal and highly dependent on monsoon conditions. Due to this, states are now facing the challenge of managing variability and intense evening demand.
This is where energy storage technologies like BESS and PHS that enhance flexibility become important for India’s power system, as they help balance the grid when there is a sudden change in the output (power) generated by RE. PHS is already emerging as a leading solution in states like Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka. At the same time, the grid needs to become smarter and more resilient through stronger transmission networks, advanced distribution systems and energy efficiency initiatives.
As Indian states are witnessing peak demand periods, the challenge is shifting from simply generating more power to building a system that is able to efficiently manage power across different regions and time periods. This requires substantial investment in storage solutions along with the adoption of more demand-side measures such as TOD tariffs and farm load scheduling.
(Rishu Garg is a senior policy expert in the Energy Policy and Regulation group at the Center for Study of Science, Technology and Policy (CSTEP), a research-based think tank)
published – May 21, 2026 08:30 AM IST
