How States Cope With Rising Summer Energy Demand

India’s electricity demand rose earlier than expected this year, with peak demand hitting an all-time high of 256.1 gigawatts (GW) on April 25. (The country followed with higher records on May 19 and May 20). Almost one-third of this peak demand was met through renewable energy (RE). While the national grid survived without any shortfall during solar hours, non-solar hours saw a deficit of 2% (4,243 megawatts) on the same day.

What is peak demand?

Peak consumption refers to the highest point of electricity consumed on the grid over a certain period, usually a 15-minute interval. While peak demand is a one-time event, it occurs within 2 to 4 hours of higher than average demand or “peak periods”. Summer months can cause longer peaks from late afternoon to evening and then at night due to the cooling load (from air conditioners and chillers). Similarly, winter peaks may last longer in the morning (between 6:00 a.m. and 10:00 a.m.) and in the evening (between 6:00 p.m. and 9:00 p.m.) due to increased heating and lighting loads during these hours, especially in northern states.

Paying attention to the duration of these peaks is important because even if they only occur for a short time, the network must reach peak load immediately. In fact, the entire energy sector infrastructure (generation, transmission and distribution capacity) needs to be planned to cope with this peak. But that’s easier said than done. It is neither energy efficient nor economical to build a system that will serve peak load periods that last only a few hours. If sufficient capacity is built to meet peak demand, it will remain unused during off-peak periods. On the other hand, if sufficient capacity is not available to meet the peak demand, then the system will face problems such as load shedding and network instability.

How do states manage demand?

States satisfy demand through two mechanisms: contractual supplies and energy purchases on the exchange. Contractual supply includes long-term power purchase agreements (PPAs) that state distribution companies (DISCOMs) sign with power producers to ensure power supply for several years. This helps the DISCOMs to meet the average demand of their consumers. Almost 85% to 90% of the demand in India is covered by contractual supply or bilateral agreements between DISCOMs and generators. In case of real-time mismatch, or when contracted supplies fall short due to sudden demand fluctuations or plant or transmission failure, DISCOMs turn to the second mechanism – buying power from power exchanges. Currently, approximately 10-15% of electricity is traded on energy exchanges.

States often adopt demand-side measures to manage peaks. Most states relied on advisories urging consumers to limit use during peak hours, typically between 6:00 p.m. and 11:00 p.m. Delhi is increasingly using measures such as day tariffs (electricity charges that vary by time of day) and smart metering to offset evening peaks, which are driven by cooling demand.

What challenges do states face due to growing demand?

Steady growth in household electrification, use of air conditioners, penetration of electric vehicles and energy consumption in agriculture have led to growth in demand for electricity in India. Over the past 5 years, the country’s peak demand has grown 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 electricity requirements.

With DISCOMs bound to long-term agreements that are signed for a fixed capacity and price, any shortfall has to be resolved through power exchanges, which are short-term markets. This exposes states to price volatility as prices in these markets rise during peak periods. Data from the Power Exchange of India shows that electricity prices in the day market have seen sharp spikes during peak periods, with rates touching the regulatory cap of ₹10 per kilowatt hour on several occasions during April and May this year.

Another problem is related to the inadequacy of the distribution network. Infrastructure expansion and modernization in India’s power distribution segment often lags behind demand growth, leading to problems in last-mile power supply 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 its transformation capacity has increased by 115% (from 6.58 amps to 49 megavolts) 1,41,63,76 VAT). However, there has not been a corresponding expansion of the distribution infrastructure and the distribution networks continue to face great stress. Recent assessments by the Central Electricity Authority suggest that nearly 13 thousand distribution transformers (DTs) fail annually in India. Some states have low DT failure rates of less than 2% such as Kerala, while some (especially northern states) show DT failure rates as high as 20%. Furthermore, overloading of transformers and feeders, aging equipment and insufficient maintenance continue to threaten the supply of last mile energy. Many states experience local outages, especially during peak demand periods, highlighting that their distribution networks are operating close to their limits and in need of upgrades.

The challenge posed by the increase in demand becomes acute for financially stressed states, as they are unable to obtain costly short-term energy or invest in modernizing the distribution network. States like Uttar Pradesh and Bihar continue to struggle with high losses, aging distribution infrastructure and overloaded transformers.

How does RE help?

RE has become central to managing the increasing demand for electricity, especially during summer peaks. Since solar and wind power plants have low operating costs, higher RE penetration can also reduce the overall power purchase cost for DISCOMs.

States with high renewable energy capacity such as Gujarat and Karnataka are able to comfortably cover the daily peak as solar power generation is relatively well aligned with daily commercial and agricultural demand. However, these states face steep evening peaks after sunset, forcing them to increasingly depend on energy storage technologies such as pumped hydro storage (PHS) and battery energy storage systems (BESS). Similarly, Tamil Nadu, with its high wind capacity, benefits significantly from wind generation during the monsoon months, reducing dependence on thermal power. However, the state has to resort to market purchases during periods of low wind output to meet high evening urban demand.

However, Punjab, with scant renewable capacity and a dominant agricultural load during the paddy sowing season which coincides with the summer peak, has to rely heavily on hydropower imports and short-term market purchases.

what needs to be done?

Despite its increasing contribution, RE cannot help ensure reliable uninterrupted power supply due to its intermittent and variable nature. Also, the demand for electricity and the production of energy from renewable sources are not always in line. Solar power production drops sharply after sunset, although demand for electricity often remains high into the evening. Similarly, wind generation is seasonal and highly dependent on monsoon conditions. Because of this, states now face the challenge of managing volatility and spikes in evening demand.

This is where energy storage technologies like BESS and PHS, which increase flexibility, become critical for the Indian power system as they help balance the grid when the output (power) generated by RE changes suddenly. PHS is already emerging as a key solution in states like Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka. At the same time, the grid itself must become smarter and more flexible through stronger transmission networks, modernized distribution systems and energy efficiency initiatives.

As Indian states witness more periods of peak demand, the challenge is shifting from simply generating more electricity to building a system capable of efficiently managing power across regions and time periods. This requires significant investment in storage solutions along with the adoption of demand-side measures such as ToD tariffs and farm load planning.

(Rishu Garg is a senior policy specialist in the Energy Policy and Regulations Group at the Center for the Study of Science, Technology and Policy (CSTEP), a research think tank)

Published – 21 May 2026 08:30 IST