This article was written in collaboration with Partner, Nayantara Nag and Ankita Agarwala of Trilegal


Electricity 2026

Electricity 2026, published in February 2026, is the International Energy Agency’s annual report on global electricity systems and markets. The full report can be downloaded here: Electricity 2026 – Analysis – IEA

As the report describes, emerging economies continue to be the main pillar of demand growth, accounting for nearly 80% of additional electricity consumption through 2030.

In this note, we set out and discuss some key statistics and items covered in the report – supplemented by our own analysis – related to India’s power sector and energy transition.




Power generation mix in 2025

Renewable electricity generation grew in India by 20% in 2025, posting its absolute strongest annual increase (+82 TWh) on record.

Growth was led by solar PV generation (+24% y-o-y), with 33 TWh of additional generation. This is a notable rise from the already strong 15% growth seen in 2024. Wind power generation was up 28%, while hydropower rose by 14% amid improved hydrological conditions. By contrast, nuclear generation decreased by 1.6%. Given strong increases in low-emissions sources in a year when India’s overall electricity demand growth rate remained relatively muted at 1.4%, coal fired generation fell by 3.2%, after a 5% rise in 2024. Gas-fired generation similarly is estimated to have declined by 9%, after rising by 6% in 2024.

Year-on-year coal fired output declined in 2025 as rapid renewable expansion outpaced slower electricity demand growth. Coal was displaced on account of a strong early monsoon curbed consumption by easing cooling needs and renewable generation seeing its largest-ever annual increase as noted above. However, this decline is expected to be temporary, with coal fired output projected to resume over the forecast period. India’s the Union Budget for 2026-2027 (the Union Budget) has significantly increased the budgetary allocation for the Ministry of Coal, marking nearly a 640% rise over the revised estimate for 2025-2026.1




Affordable power prices

While average wholesale electricity prices in 2025 rose year-on-year in multiple regions and countries, including Europe and the United States, India (among other countries) saw lower prices compared to 2024. Wholesale electricity prices in India declined by 16% y-o-y in 2025 (-13% in INR/MWh) to an average of USD 46/MWh. There are a few key reasons for this:

India’s energy prices are not gas-price driven, as gas accounts for less than 5% of India’s power generation.

India’s coal supply in 2024–25 improved materially on account of higher domestic production and lower reliance on imported coal.

India added large amounts of solar PV, wind and hydropower generation (particularly given a strong monsoon), which introduced more zero marginal cost generation and pushed thermal plants down the dispatch order.

A large percentage of electricity in India is sold through long term PPAs, not spot markets.

India currently has no explicit carbon price in wholesale electricity.

However, low electricity prices does not mean there is adequate capacity at all times, and as discussed below shortages are expected for meeting peak demand over the coming years which would need to be addressed.




Demand growth forecast for 2026-2030

India’s annual electricity consumption is expected to grow at an average of 6.4% annually until 2030, which is aligned with the IMF’s GDP growth forecast for India. In capacity terms, this means an additional 570TWh of annual consumption in the next five years.

The growth in demand would primarily be driven by the industrial sector, cooling (such as, growth in usage of ACs), increasing energy requirements for data centres (particularly those focused on AI and machine learning) and electrification of agriculture and transport infrastructure (for example, EV charging, electric irrigation).

This demand growth is also propelled by favourable government policies that are designed to foster industry and infrastructure led growth and provide incentives to enable such growth. An example of this is the electrification of urban transport driven by the national FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) scheme and various state-level EV policies that provide subsidies and mandate the rollout of charging infrastructure. Similarly, initiatives like ‘Make in India’ aim to boost the industrial sector, directly contributing to increased electricity demand.

In comparison, the share of households and services to electricity demand is expected to decrease slightly compared to 2021-2025. This slower rate of growth in electricity demand can be attributed to, among other factors, the preceding rapid urban household formation that occurred between 2015 and 2024 as well as increased rooftop solar adoption among residential buildings. The PM-Surya Ghar: Muft Bijli Yojana scheme has already added around 7 GW of distributed solar capacity to India’s electricity system.2




Power generation mix for 2026-2030

India has already achieved 50% of its installed capacity from non-fossil fuel sources ahead of its 2030 target under the Paris Agreement. Between 2026 and 2030, the country is expected to add almost 300 GW of renewable power capacity. Over the past two years, policy attention has consciously shifted from pure capacity growth to system design. Tenders for renewable power with energy storage or peak power supply now dominate auctions.3 The Union Budget has increased viability gap funding for battery energy storage systems from INR 1 billion to INR 10 billion.

The transition to tenders for firm, dispatchable renewable power (round-the-clock, peak power etc.) represents a significant evolution in the contractual framework for the procurement of power. The power purchase agreements (PPAs) for these projects are more complex than those for standard solar/wind projects, incorporating obligations on generators for availability, dispatch, and scheduling, with higher penalties for non-compliance. This structure allocates greater performance risk to the project developers. A similar trend is also visible in the commercial and industrial (C&I) segment, where independent power producers are increasingly offering firm or hybrid renewable solutions combining solar, wind, and storage to meet round-the-clock or peak power requirements of C&I offtakers.

Around 50% of the additional demand growth through 2030 is forecast to be met by solar PV and 25% by coal, with the remainder supplied by wind, nuclear, hydropower and gas. As noted above, electricity demand in India is expected to increase at a strong annual average of 6.4% through 2030 despite a slowdown in growth in 2025 amid weather impacts. As a result, higher coal burn in the power sector is set to continue, rising on average by around 2.5% over the next five years. Coal will maintain its role as the main source of electricity supply, though its share in generation is expected to fall from around 70% in 2025 to 60% by 2030.

Solar PV generation is expected to rise by an average annual 24%, with its share in total generation set to reach the 10% mark in 2026 and approach 18% in 2030. Wind generation is also forecast to increase at a strong pace, growing by 8.2% on average annually. As a result, the share of variable renewable energy in total electricity generation is expected to reach 24% in 2030, rising from 14% in 2025. The total renewables share is set to surpass the one-third mark in 2030, up from 24%.

Domestic solar PV module manufacturing capacity reached 100 GW under the Approved List of Models and Manufacturers (ALMM) in 2025, reflecting the country’s goal of a self-reliant clean energy supply chain. National schemes continue to support solar PV deployment, with programmes such as PM-KUSUM mentioned below, which incentivizes the shift to solar in meeting agricultural electricity demand, and the PM-Surya Ghar: Muft Bijli Yojana initiative mentioned above, which is aimed at promoting rooftop solar installations using subsidies.

Nuclear generation is forecast to post strong gains, rising by an average rate of 15% over the forecast period, as new reactors become operational. The country is expected to see increased investments in the nuclear power sector following the liberalisation of the nuclear regime and FDI being permitted up to 49%.

Gas-fired generation is forecast to rise annually by 9.7% on average, supported by a more favourable LNG price environment.




Demand flexibility and smart meters

Government policies such as PM-KUSUM for the agriculture sector (which promotes use of solar powered pumps for irrigation and daytime power supply to agriculture feeders) incentivises farmers to irrigate farms during the day, when the electricity load overlaps with solar PV output.

In addition, through the implementation of the time of day (ToD) tariffs by way of the Electricity (Rights of Consumers) Amendment Rules, 2023, electricity is now cheaper during off-peak times and more expensive during peak hours in the evening which incentivises demand flexibility (instead of one flat electricity price).

However, ToD pricing requires hourly measurement of electricity consumption and automated billing by time block, for which smart meters are required. As of December 2025, only 22% of approved smart meters have been installed nationwide. In terms of absolute numbers, as of January 2026 around 53 million smart meters have been installed.

At the state level, Maharashtra mandated demand response through ‘Demand Flexibility Portfolio Obligations’, which requires distribution companies to procure demand flexibility resources equal to 1.5% of the previous financial year’s peak demand in 2025-26 financial year, rising to 3.5% by 2029-30 financial year. In practice, this requires distribution companies to assemble a portfolio of consumers or controllable loads capable of adjusting demand during peak periods, with compliance verified through at least one annual demand flexibility event under the state’s measurement and verification framework.




Peak load demand requirements

With regional and national peak loads rising faster than average demand, generation asset planning across India requires a greater focus on meeting peak load requirements.

A majority of states in India will likely have significant shortages by 2034 even if all planned capacity is commissioned on time. This is as per resource adequacy analysis done by the Central Electricity Authority (CEA) in India and is notwithstanding the declining rates of yearly unserved energy and unmet peak load between 2017 and 2025 in all regions.

Demand is growing faster than firm capacity. India’s future capacity additions are heavily skewed towards variable renewable energy, together with some storage and limited new coal capacity. Given the intermittent nature of solar and wind, reliable peak capacity by 2034 is forecast to be inadequate even with the significant headline GW capacity additions. The unserved capacity would vary across states and could surpass 38 TWh (14.9%) in Uttar Pradesh in 2030, 20 TWh (10.1%) in Tamil Nadu, 11 TWh (11%) in West Bengal or 7 TWh (30%) in Assam the same year. The unserved capacity number would be more manageable in Maharashtra, where values of unserved energy could remain just above 3 TWh (1.6%) in 2030. This is largely on account of Maharashtra having a more diverse generation mix (coal, gas, hydro, renewables) and better demand response and market access.

To counter this unserved capacity, the CEA notes that Indian states must continue signing long term capacity contracts for coal, renewables, and storage, rather than relying solely on short term market and operational fixes.




Development of nuclear power


India is looking to nuclear power as a key part of its energy security and decarbonisation strategy with the newly announced Nuclear Energy Mission, which includes a target of 100 GW of nuclear capacity by 2047. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025 has revamped India’s nuclear legal framework by enabling limited private participation under the government’s regulatory oversight, while also amending the civil nuclear liability regime. In addition, the Union Budget has extended the basic customs duty (BCD) exemption on import of goods required for all nuclear power projects till 2035, with no capacity limit. Together, these measures aim to enhance domestic nuclear capabilities through increased private sector participation as well as accelerate the development and deployment of advanced nuclear technologies such as small modular reactors (SMRs). Nuclear generation is expected to grow steadily over the 2026-2030 period, at an average annual rate of 12%.



Continued roll-out of the Revamped Distribution Sector Scheme


The Revamped Distribution Sector Scheme (RDSS) was launched in 2021 with a view to reducing aggregate technical and commercial (AT&C) losses at electricity distribution companies in India (DISCOMs) by implementing prepaid smart meters and upgrades to distribution infrastructure (such as, stronger feeder and transformer equipment) as well as through training and capacity building within DISCOMs.



Grid access management

Key priorities for building a future-ready grid in India include ensuring grid reliability and resilience, minimizing curtailment, and integrating technologies such as battery storage, green hydrogen, and offshore wind.

Grid access is being prioritised via queue management and grid capacity auctions. India is adding very large volumes of solar and wind capacity, often faster than transmission lines can be built or sub-stations can be upgraded. As a result, while many renewable projects achieve physical completion, they may be unable to evacuate power. India has tightened connectivity rules to prevent hoarding of transmission capacity by requiring generation asset developers to meet milestone deadlines, and achieve financial closure and land acquisition within agreed timeframes at the risk of losing grid allocation.

Further, to address the intermittency of renewable energy and to maintain grid stability, the government has implemented a series of measures to promote the development of energy storage technologies, including battery energy storage systems and pumped storage projects. To optimize transmission use, the connectivity rules have also been amended to allow standalone energy storage projects and wind projects of 50 MW or more to seek either full-day or non-solar-hour access to the transmission grid, while standalone solar projects are generally limited to solar-hour access.4




Key conclusions

Here are the highlights for India in the coming years based on our assessment of the Electricity 2026 report:

Demand growth would ensure continued buildout of energy infrastructure, but the nature of demand growth means that flexibility, firming and grid integration would become the critical value pool.
The next wave of key performers in India’s energy sector would be those that are able to provide power as a service that meets the demand profile of consumers (such as, guaranteed availability during peak hours) and can deliver “deliverable” power (actually evacuable and dispatchable), and “firm” or peak-aligned products (capacity, storage, hybrid supply), not just energy-only megawatts.
With coal continuing for adequacy, investors should continue to expect hybrid tenders, peaking PPAs, and new revenue streams tied to capacity/availability rather than pure kWh.
Nuclear power supply chain / SMR ecosystem will become a long-cycle strategic theme for OEMs, EPCs and strategic investors.
Grid evacuation constraints, firm capacity shortages at peak and slow smart-meter rollout (limiting ToD/demand response scaling), with DISCOM capability and contracting would remain a relevant consideration for investors and financiers.

 

Norton Rose Fulbright is not licensed to practice Indian law and does not provide advice on Indian law matters. Any comments or analysis provided herein are for general informational purposes only and should not be construed as legal advice under Indian law. For formal advice on Indian legal issues, please consult a qualified Indian law firm or practitioner.