India's summers are arriving earlier, and becoming hotter and less predictable. Over the last weekend of April, 95 of the world's 100 hottest cities were in India. Compounding this is persistence of unusually warm nighttime conditions across parts of north, central and eastern India. Even cloud cover or brief storms offer only temporary relief. Also, IMD has forecast El Nino conditions in the coming months.Agricultural productivity declines under heat stress and erratic rainfall, while urban areas face amplified risks due to the urban heat island effect. If unaddressed, estimates suggest extreme heat could cost India $150-250 bn in lost economic activity by 2030, putting 2.5-4.5% of GDP at risk.
This stress is visible in India's power system. On April 25, the country recorded a peak power demand of 256 GW, an 8.9% increase from 235 GW in April 2025. More notably, peak demand is arriving earlier in the year. India is expected to record a peak demand of around 270 GW this year, while cities such as Delhi have crossed 7 GW of demand in April, levels that were reached only in June in 2024 and 2025.
Despite record-high peak demand, the system has managed to meet it so far. Nearly one-third of the peak demand was met by RE. Solar contributed close to 57 GW, accounting for roughly 22% of total supply. Its growing contribution to the nation's power mix has become visible over time. Its share in total daily generation on the day of peak demand increased from 5.63% in 2022 to about 6% in 2023, 7.3% in 2024, and 8.9% in 2025.
Although solar accounts for around 28% of India's installed power capacity as of March 2026, limited battery storage constrains its utilisation. Between May and December 2025, an estimated 2.3 TWh of solar generation was curtailed due to insufficient grid flexibility and transmission capacity.
This imbalance is also visible in market signals. During peak solar hours, excess supply has, at times, pushed electricity prices on power exchanges to near zero, followed by a sharp spike during evening demand peaks. This reflects limited flexibility to store or shift renewable generation to when it's needed most. The system, in effect, is oversupplied and undersupplied at the same time, just at different hours of the day. Addressing this requires stronger price signals and market designs that incentivise flexible capacity and round-the-clock renewable solutions.
Also, peak demand is shifting beyond solar hours. Evening peaks increasingly require energy storage. Without sufficient storage capacity, the grid relies heavily on thermal generation to fill the gap, raising both cost and emissions concerns.
India has begun integrating storage into system planning, with over 90 GWh of battery storage capacity in the pipeline.
Deployment, though, remains at an early stage, and execution risks such as aggressive bidding and project delays continue to slow progress. Past learnings from the wind sector show that overly aggressive tariff discovery can result in a large share of projects failing to materialise. This highlights the need for more market-aligned pricing frameworks.
Demand-side management must also play a far greater role. With cooling demand now driving peak load, aligning consumption patterns with renewable generation is critical. Solar has become increasingly cost-competitive within India's energy mix, presently at $0.032-0.033 (₹2.70-2.76) per kWh.
Parallelly, several states have implemented solar hour-aligned time-of-day (ToD) tariffs. Expanding complementary demand-side interventions, like smart metering, dynamic pricing and shifting industrial loads, can further enhance grid efficiency and improve utilisation of solar power. Even small efficiency gains can have large impacts. For instance, raising AC temperatures by just 1° C can reduce energy use by around 6%.
India is targeting 500 GW of non-fossil capacity by 2030. Its energy transition is increasingly shifting from managing capacity to managing complexity. So, the real test is no longer how much RE capacity India can build, but how effectively it can integrate, store and use it when demand peaks.
This stress is visible in India's power system. On April 25, the country recorded a peak power demand of 256 GW, an 8.9% increase from 235 GW in April 2025. More notably, peak demand is arriving earlier in the year. India is expected to record a peak demand of around 270 GW this year, while cities such as Delhi have crossed 7 GW of demand in April, levels that were reached only in June in 2024 and 2025.
Despite record-high peak demand, the system has managed to meet it so far. Nearly one-third of the peak demand was met by RE. Solar contributed close to 57 GW, accounting for roughly 22% of total supply. Its growing contribution to the nation's power mix has become visible over time. Its share in total daily generation on the day of peak demand increased from 5.63% in 2022 to about 6% in 2023, 7.3% in 2024, and 8.9% in 2025.
Although solar accounts for around 28% of India's installed power capacity as of March 2026, limited battery storage constrains its utilisation. Between May and December 2025, an estimated 2.3 TWh of solar generation was curtailed due to insufficient grid flexibility and transmission capacity.
This imbalance is also visible in market signals. During peak solar hours, excess supply has, at times, pushed electricity prices on power exchanges to near zero, followed by a sharp spike during evening demand peaks. This reflects limited flexibility to store or shift renewable generation to when it's needed most. The system, in effect, is oversupplied and undersupplied at the same time, just at different hours of the day. Addressing this requires stronger price signals and market designs that incentivise flexible capacity and round-the-clock renewable solutions.
Also, peak demand is shifting beyond solar hours. Evening peaks increasingly require energy storage. Without sufficient storage capacity, the grid relies heavily on thermal generation to fill the gap, raising both cost and emissions concerns.
India has begun integrating storage into system planning, with over 90 GWh of battery storage capacity in the pipeline.
Deployment, though, remains at an early stage, and execution risks such as aggressive bidding and project delays continue to slow progress. Past learnings from the wind sector show that overly aggressive tariff discovery can result in a large share of projects failing to materialise. This highlights the need for more market-aligned pricing frameworks.
Demand-side management must also play a far greater role. With cooling demand now driving peak load, aligning consumption patterns with renewable generation is critical. Solar has become increasingly cost-competitive within India's energy mix, presently at $0.032-0.033 (₹2.70-2.76) per kWh.
Parallelly, several states have implemented solar hour-aligned time-of-day (ToD) tariffs. Expanding complementary demand-side interventions, like smart metering, dynamic pricing and shifting industrial loads, can further enhance grid efficiency and improve utilisation of solar power. Even small efficiency gains can have large impacts. For instance, raising AC temperatures by just 1° C can reduce energy use by around 6%.
India is targeting 500 GW of non-fossil capacity by 2030. Its energy transition is increasingly shifting from managing capacity to managing complexity. So, the real test is no longer how much RE capacity India can build, but how effectively it can integrate, store and use it when demand peaks.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Vibhuti Garg
The author is idirector, South Asia, IEEFA
Kaira Rakheja
The author is energy analyst, South Asia, IEEFA