Clean energy key to addressing India’s power demand peaks

Coal remains the backbone of supply, accounting for nearly 73 per cent of the total daily generation.

Mumbai: Despite the rapid growth of solar, India continues to rely heavily on coal to meet evening peak demand, a new briefing note by the Institute of Energy Economics and Financial Analysis (IEEFA) finds. 

Coal remains the backbone of supply, accounting for nearly 73 per cent (157.6GW) of the total daily generation, according to IEEFA, which examines issues related to energy markets, trends, and policies.

As of FY2024, the industrial, commercial, residential, and agricultural sectors accounted for approximately 32 per cent, 10 per cent, 31 per cent, and 22 per cent of India’s total electricity sales, respectively.

“While still modest in scale, electric vehicles (EVs) are beginning to contribute to electricity demand. Electricity consumption by EVs has grown nearly tenfold – from 59 million units (MUs) in FY2021 to 569MUs in FY2024,” says Charith Konda, contributing author and Energy Specialist at IEEFA, South Asia.

IEEFA’s analysis shows that the alignment of peak demand with solar availability presents an opportunity to maximise solar utilisation, making it possible to tap into the cheapest available renewable energy source, reduce daytime reliance on coal, and cut emissions.

“The persistent evening peaks, which now nearly match daytime highs, reinforce the urgency of deploying storage solutions, demand measures and hybrid renewable projects to meet post-sunset demand,” says Saloni Sachdeva Michael, co-author and Energy Specialist at IEEFA, South Asia. The sharp rise in demand after sunset strains the grid and drives up market prices.

“Incentivising load shifting from evening to day, especially among industrial and commercial consumers, can help align demand with abundant solar generation. To support this, Time of Day tariffs should be made more effective by significantly widening the price differential between peak and off-peak periods,” suggests Vibhuti Garg, contributing author and Director, IEEFA, South Asia.

The authors advocate the use of energy-efficient appliances such as ACs, lights, and industrial motors. Zero-interest financing can ease the upfront costs of these appliances, making them affordable for households and small businesses. Additionally, the government can consider reducing the goods and services tax (GST) on 5-star rated appliances.

“Accelerating the use of battery energy storage systems can ensure grid stability and reduce the need for fast-ramping coal. Battery storage also enables energy arbitrage by charging during near- zero-cost solar hours and discharging during high-demand hours, making it a critical tool for meeting peak demand efficiently. To reduce the cost of energy storage, the government must fast-track PLI disbursals and rationalise import duties until domestic manufacturing scales up,” says co-author Kaira Rakheja, Energy Analyst, IEEFA, South Asia.

Hybrid projects that combine complementary generation patterns of solar (daytime), wind (evening and night), and hydro (dispatchable as needed) also make for a diversified and flexible energy mix. When paired with battery storage, these hybrids can store surplus energy and release it during peak demand hours, particularly in the evening.