Doubling air-conditioner efficiency can help India avoid power shortages, save consumers up to Rs 2.5 lakh crore: Study

Mumbai: As India’s power grid comes under mounting pressure during another intense summer, a new study by the India Energy and Climate Center (IECC) at the University of California, Berkeley, has projected that doubling the energy efficiency of room air conditioners over the next decade could help the country avoid power shortages while saving consumers up to Rs 2.5 lakh crore ($25 billion).

The study, titled “Beating the Heat: How Air Conditioner Efficiency Standards Help India Avert Power Shortages and Cut Consumer Bills,” comes at a time when rising temperatures, rapid urbanisation and increasing household incomes are driving a sharp surge in cooling demand across India. With heatwaves becoming more frequent and prolonged due to climate change, air-conditioning is increasingly shifting from a luxury to a necessity in urban India.

According to the report, India currently adds 10–15 million new air-conditioners annually, with another 130–150 million expected to be installed over the next decade. Without stronger efficiency measures, ACs alone could contribute 120 GW of peak electricity demand by 2030 and 180 GW by 2035 — accounting for more than 30 per cent of India’s projected peak demand.

“ACs are already contributing 60 to 70 GW to peak demand, and their growth is outpacing the grid’s ability to keep up after sunset,” said Nikit Abhyankar, lead author of the study and faculty member at UC Berkeley. “Without intervention, we risk blackouts or costly emergency fixes. But with smart policy, we can turn this challenge into a win for consumers, manufacturers and the grid.”

The study said India’s cooling challenge is no longer merely an energy issue but also a public health and economic concern. With large sections of the population exposed to extreme heat, access to affordable cooling is becoming critical. However, inefficient cooling appliances could place enormous stress on the electricity system, particularly during evening peak hours when solar generation declines.

The report welcomed the Bureau of Energy Efficiency’s proposed 2028 upgrade to AC efficiency standards, which would raise the minimum efficiency threshold by 25 per cent. It, however, recommended a long-term roadmap under which the most efficient ACs available in India today become the minimum standard by 2033.

Researchers estimate that such a transition could reduce peak electricity demand by 10 GW by 2030 and 47 GW by 2035 — equivalent to avoiding the construction of nearly 100 large power plants. This, they said, could save around Rs 8 lakh crore ($80 billion) in avoided power infrastructure investments.

The study also highlighted the financial benefits for consumers. Although efficient ACs may involve slightly higher upfront costs, they could generate net savings of Rs 90,000 crore to Rs 2.4 lakh crore by 2035 through lower electricity bills, with the additional cost recovered within two to three years.

“A common concern is that more efficient ACs will be more expensive,” said Amol Phadke, co-author and UC Berkeley faculty member. “But our analysis of global markets, including India, shows that efficiency is not the main driver of retail prices. With the right policy support, higher efficiency can go hand in hand with lower costs as manufacturers scale production, supply chains mature and markets become more competitive.”

The report noted that the Indian market is already showing signs of transition, with more than 1,000 AC models — around 15 per cent of all offerings — already performing above India’s current 5-star efficiency threshold. Many of these are being produced by domestic manufacturers.

“This is a chance for Indian manufacturers to lead,” said Jose Dominguez, co-author and IECC researcher. “With the right policy signal, they can scale under Make in India and PLI schemes, positioning India as a global hub for high-efficiency, low-cost ACs.”

With urban AC ownership still estimated at only 15 per cent but expected to rise rapidly in the coming years, the study stressed that decisions taken now would shape India’s future energy trajectory.

“Every AC installed today locks in future electricity use,” Abhyankar said. “We have a narrow window to ensure they’re efficient. If we get this right, India can stay cool, avoid shortages and lead the world in sustainable and affordable cooling.”