India's power sector experienced considerable pressure in 2026 as the effects of El Niño became evident. A significant 16% reduction in hydropower generation occurred between June and October, a period typically marked by peak hydropower output. This shortfall was entirely covered by an increase in thermal power generation, highlighting the critical role of India's thermal assets in maintaining grid stability.
Hydropower Deficit Drives Thermal Reliance
Analysis of electricity generation data revealed that thermal power plants boosted their output by 16% during the monsoon season to offset the deficit caused by reduced rainfall. This surge in thermal generation, alongside a 39% increase in solar power and an 8% rise in coal generation compared to the previous year, underscores the ongoing necessity of existing thermal infrastructure for system reliability, according to Nikit Abhyankar, faculty at the University of California, Berkeley.
Abhyankar's research, which compiles extensive daily electricity generation data across India, indicates a visible capacity scarcity in 2026. Non-solar-hour electricity market prices soared by 71% year-on-year in September, even as the generation-weighted thermal variable-cost proxy rose by a modest 4.4%. The southwest monsoon concluded on October 15 with a 15% rainfall deficit nationally, with key hydropower states like Maharashtra, Gujarat, and Rajasthan experiencing particularly large shortfalls.
Coal Stocks Under Pressure Despite Record Loading
Despite record-high coal loading by Indian Railways, coal stocks at most thermal power plants remained critically low. Railways reported over 22% growth in coal loading in October compared to the previous year, dispatching an average of 430 coal rakes per day during the first half of Financial Year 2026-27. This sustained transportation effort aimed to meet the escalating demand from thermal plants, which are burning more coal to ensure round-the-clock electricity, especially during non-solar periods.
Rising Demand and Future Efficiency
Electricity demand was further fueled by the residential sector, which accounts for approximately 25% of total usage and has seen an annual growth rate of 6% as of 2024-25. High cooling needs, in particular, have driven residential electricity consumption from 256 TWh to 409 TWh over the past decade, making it the second-highest consumer after the industrial sector.
A report by the Bureau of Energy Efficiency (BEE) and CLASP recommends enhancing energy efficiency standards, particularly enforcing stricter Minimum Energy Performance Standards (MEPS) for high-impact appliances like air conditioners and refrigerators. This is crucial for managing the anticipated growth in electricity demand driven by urbanization and rising household incomes.