Meeting India’s rising electricity demand will require a strategic shift in how the country manages its energy resources, according to a new briefing note from the Institute for Energy Economics and Financial Analysis (IEEFA) South Asia. Despite the rapid expansion of solar power capacity, coal remains the primary source for meeting evening electricity peaks, underscoring the need for energy storage and demand-side interventions.
The report highlights that peak electricity consumption in India typically occurs twice each day—once around 3 PM during solar hours and again between 9 PM and 11 PM. These surges are largely attributed to rising air conditioning use, more frequent heatwaves, and increased demand from industrial and commercial sectors. While solar generation helps meet daytime loads, the evening peak continues to rely heavily on coal-fired power.
Coal contributed nearly 73% of India’s daily electricity supply in FY2024, with a generation capacity of 157.6 GW, the note states. The industrial sector accounted for 32% of power sales, followed by residential (31%), agriculture (22%), and commercial use (10%). While electric vehicles still represent a small portion of total demand, electricity consumption in this segment increased nearly tenfold between FY2021 and FY2024.
IEEFA analysts argue that aligning peak consumption with solar availability presents an opportunity to make better use of low-cost renewable energy during the day, while reducing reliance on fossil fuels. The evening demand surge, however, continues to stress the grid and contributes to price volatility in electricity markets.
To address this challenge, the report calls for scaling up battery energy storage systems, improving demand flexibility, and developing hybrid energy projects that integrate solar, wind, and hydro sources. These steps, according to IEEFA, could ensure greater stability in supply, particularly during post-sunset hours.
Encouraging industries and commercial users to shift part of their energy consumption from evening to daytime could help balance the load, the report suggests. Making Time-of-Day (ToD) tariffs more effective—by widening the gap between peak and off-peak pricing—could serve as an incentive for this transition.
The authors also recommend promoting energy-efficient appliances such as air conditioners, lighting, and motors. Making financing more accessible—such as through zero-interest loans—and lowering taxes on high-efficiency models could support broader adoption, especially among small businesses and households.
Battery storage is also presented as a key solution for managing demand swings. By storing solar energy generated during low-cost hours and deploying it during evening peaks, storage systems can reduce the need for fast-ramping coal plants. To bring down the cost of these technologies, IEEFA suggests fast-tracking Production Linked Incentive (PLI) payments and reviewing import duties until domestic production scales up.
Hybrid energy projects combining solar (daytime), wind (evening and night), and hydro (as needed) are seen as another way to balance supply with demand. However, challenges such as land acquisition, transmission planning, and the cost of storage continue to hinder the growth of these initiatives.
To improve deployment, the report recommends coordinated land and grid access planning for hybrid projects, revisions to power purchase agreements to reflect the value of consistent and dispatchable supply, and clearer policies on compensation for storage-based services.
Improved demand forecasting, grid operations, and planning using advanced digital tools are also considered necessary to ensure efficient energy use.
According to the IEEFA team, a combination of storage deployment, hybrid renewable expansion, better demand management, and digital innovations will be essential to building an energy system that can reliably meet India’s growing power requirements while reducing emissions and long-term costs.
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