A power warning India needs to heed

Rising demand and power shortages underscore the need for stronger grids, better planning and reliable electricity supply

Is the era of increasingly uninterrupted power over? September 2026 should be a wake-up call for India’s electricity sector.  In the wake of three adverse shocks — the war on Iran, a weak monsoon and warmer nights — the system has coped, but the signals are flashing amber, perhaps even red. Consider the success, warning and lesson.   

Success. Renewables have helped cope with surging demand. Since Covid, average and peak electricity demand have grown annually at about 8 per cent. In the wake of the three shocks, between April 1 and September 20, the average daily electricity supplied increased by 10.5 per cent over the same period in 2025 and peak demand that was met rose by 11.8 per cent. Creditably, the system stepped up.   

Renewables were key to meeting this increased demand. Wind and solar capacity have been increasing over the last few years but in this year of stress they played an especially important role. 

Between April 1 and September 20, wind and solar supplied 18.3 per cent of the electricity delivered through the grid, up from 15.9 per cent a year earlier. But as Figure 1 shows, they met about three-quarters of the midday increase in demand, although only a fifth of the evening increase. 

 

More broadly, India’s demand peaks in the afternoon and late evening. Solar has eased the former even to the extent that prices in solar hours ran below last year’s from April to August, although in September 1-20 they more than doubled from ₹1.4 to ₹3.1 per unit. Evening peaks and winter’s shorter solar window continue to pose a challenge. Darkness not at noon will require a different solution. 

Warning. The return of load-shedding aka power shortage. There are few quainter euphemisms of Indian bureaucratese than “load-shedding.” A civil engineer whose bridge collapses would hardly report a successful reduction in traffic. Yet disconnecting consumers can pass for balancing electricity demand and supply. Power cuts protect the grid but are a failure of service, short-changing citizens. Indeed, these are rising, threatening to become a charged political issue. From Punjab to Kerala, Maharashtra to Tamil Nadu and Karnataka, policymakers and opposition leaders have issued warnings, and citizens’ protests are rising.   

In other words, the flip-side of the success, namely meeting rising demand, has been the shortfall in meeting all the demand. Official figures put the evening shortfall at more than four times last year’s between April 1 and September 20, and at almost nine times in the first 20 days of September. It is not that in the last decade all consumers have received 24x7 uninterrupted power. But shortages were less of an issue because the direction of improvement was positive. Recently, that has been changing. 

Reliable public data on true shortages is not readily available. One, albeit imperfect, proxy of true power availability is to look at Google searches for reports of power cuts. We sum Google search interest in 49 power-cut terms across 12 Indian languages, week by week on one common scale. As Figure 2 shows, searches this year have run well above the previous three years, peaking in the May heatwave and rising again in early September. The burden also falls unevenly. Villages were never on a round-the-clock baseline to begin with — rural feeders, households included, are scheduled fewer supply hours than towns — and this summer’s cuts ran far longer in villages than in cities. Hence the rising grievances. 

We have other measures of scarcity. The power exchange is a market for balancing marginal demand and supply and is used by the utilities as such. During September 1-20, average sell offers during the evening peak on IEX’s day-ahead market collapsed from 7.5 GW to 1.3 GW per block, reflecting scarcity. 

An indicator of system precarity is the frequency at which the grid operates. There is typically a band — 49.90 to 50.05Hz — within which the grid must operate to preserve its physical health. Between September 1 and 20, the frequency was below 49.90Hz for 30 per cent of the evening hours, up from 11 per cent a year earlier; on the worst evening, September 15, it was below the band for more than two-thirds of the time. As Figure 3 shows, evenings have not spent this much time below the band since the coal crisis of April 2022. 

In sum, a variety of indicators suggest serious shortfalls in supply, rising prices, grid stress and consumer distress. One consequence will be that most discoms will show deteriorating financial performance because costs have gone up while prices have remained unchanged. State government finances will take a corresponding hit because effective subsidisation will have risen. 

Lesson. Shocks are no longer shocks. 

Policy-makers might dismiss this as an abnormal year. The beckoning complacency would be a grave mistake. The long-run capability of the electricity sector must improve if India has any hopes of becoming an electrostate that is internationally competitive. But climate change and geopolitical uncertainty mean that demand will be continually buffeted. Shocks will be a feature, not a bug, and while technology in the form of improved battery storage will help, it will not be a panacea. 

The truth is this: India’s electricity distribution system has been in trouble for some time and is approaching crisis levels because of years of under-investment, poor management, perverse incentives, and disastrously inefficient and costly populism. The success of renewables has obscured these fundamentals. And while there are some good apples, most state governments are culpable, with many richer states’ electricity systems probably faring worse than others’. 

Our earlier work shows how mistargeted subsidies benefit better-off consumers while shifting costs to businesses and future taxpayers. Repeated bailouts have created a moral hazard: Passing losses to future taxpayers blunts the consequences of poor management.   

States must now act on a war footing: Publish data on outages, improve demand forecasts, stress-test contingency and resource adequacy plans, secure evening supply, invest in networks, focus on solutions like smart metering, time-of-day tariffs and enforce management accountability. Operational improvements can begin now; durable reform requires sustained investment and institutional work over several years. This cannot be fixed in one or two summers. 

At the same time, the Centre too must step in because the actions and inactions of state governments create a national problem. It must ruthlessly tighten budget constraints on state governments by conditioning support on upfront reforms.  

In the next round of state elections from Punjab and Uttar Pradesh to Karnataka, power could well become a defining issue. Without action, politicians and citizens in India could be singing exasperatedly, “Hello darkness, my old friend. Why have you come to stalk me again?” (with due apologies to Paul Simon and Art Garfunkel).

 

(The analysis, not the writing, in this piece is based on extensive use of AI) 

Abhishek Anand is visiting fellow, Madras Institute of Development Studies; Praveen Ravi is principal consultant, CEGIS;

Navneeraj Sharma is an independent consultant; and Arvind Subramanian is senior fellow, Peterson Institute for International Economics