India, the world’s third-largest power producer and a net electricity exporter, paradoxically faces frequent domestic power shortages. While generation capacity has grown, structural issues—rapid demand growth, aging infrastructure, high transmission losses, and financially stressed DISCOMs—undermine supply reliability.
Renewable energy’s variable output, combined with limited storage capacity, exacerbates shortfalls during peak periods. Rigid long-term export contracts and constrained inter-regional transfers further limit flexibility. Addressing these challenges requires modernizing grid infrastructure, expanding energy storage, improving financial health of DISCOMs, and adopting dynamic procurement models to balance domestic needs with export commitments.
India is currently the world’s third-largest electricity producer, with an installed power capacity of 466.24 GW as of January 31, 2025, and stands as a net power exporter. Yet, millions across the country continue to endure regular power outages—a paradox that highlights critical challenges in energy management. While projections indicate these shortages may persist until 2027, India continues to supply substantial electricity to neighbouring countries such as Bangladesh, Nepal, and Myanmar under long-term agreements and regional energy cooperation deals. This contradiction—exporting power abroad while facing domestic shortfalls—raises urgent questions about the balance between international commitments and ensuring reliable access for Indian citizens.
At its core, this is not a problem of insufficient generation. India has built up a sizeable electricity generation capacity over the past two decades. In the first quarter of 2025 alone, India generated 445.49 billion units of electricity, marking a 3.6% increase over the 429.85 Billion units generated in 1Q 2024. This growth reflects not just rising energy demand but also a gradual transition in the country’s generation mix. Solar and wind generation surged by 16.6% from Q1 2024 to Q1 2025. Nuclear power generation during the period increased by 16.7%, and the share of fossil fuel–based generation declined from 80.38% in 1Q 2024 to 77.9%, indicating progress towards cleaner energy sources.
By February 2025, electricity production in India reached 121,073 GWh. For historical context, India’s average monthly electricity production since 1987 stands at approximately 53,760 GWh. Peak production reached an all-time high of 145,046 GWh in May 2024. These numbers confirm India’s capacity to generate more power than it consumes. Industrial activity accounted for around 41% of total final electricity consumption in 2023, making it the largest sectoral consumer.
Meanwhile, India exported electrical energy worth US$ 1.49 billion, totaling over 21.5 billion kWh in 2024–25. The key export destinations were:
Despite these achievements, India faces rising electricity shortages, especially during the hot and humid months between April and October. Peak demand during these periods is driven largely by increased cooling requirements. In May and June, the country faces the highest risk of supply gaps.
In May this year, the power ministry, exercising powers under Section 11 of the Electricity Act, directed power generation companies to operate and maintain their stations in exceptional situations. This directive extends its previous order, mandating these plants to continue operating at full capacity until April 30. Under the directive, plants are allowed to recover their costs through power purchase agreements if higher fuel prices result in elevated tariffs. To facilitate this, the ministry updates benchmark energy charge rates for these plants on a fortnightly basis. (India has 15 imported-coal-based power plants that collectively add around 17 GW to the country’s total generation capacity. Among them are Tata Power’s Coastal Gujarat Power, Adani Power Mundra, Essar Power Gujarat, and JSW Ratnagiri.)
On May 30, 2025, India’s power demand soared to a record 250 gigawatts, exceeding the month’s forecasted peak of 235 GW. Remarkably, the national transmission grid remained stable, thanks to significant upgrades made since the massive blackout India experienced on July 30–31, 2012. During that event, the northern and eastern grids collapsed due to overload, leaving 620 million people—about 9% of the global population at the time—without electricity for over 13 hours. Since then, India’s transmission infrastructure has evolved into the world’s largest unified grid.
In the context of rising renewable energy use, India’s grid operates dynamically. For example, northern India often exports power during the daytime due to abundant solar generation. Forecasts for such patterns are published up to 11 months in advance to facilitate trade while respecting grid codes and transfer limits. Week-ahead forecasts based on weather predictions estimate how much solar and wind power will be generated, guiding decisions about how much hydro, coal, and gas-based power needs to be dispatched. During the day, solar energy comfortably meets demand, allowing coal-fired plants to reduce output. But as night falls, coal plants ramp up production. Hydropower is typically reserved for peak demand periods when market prices are highest, while gas-based plants serve as a last resort during shortfalls.
Grid-India ensures balance by redistributing electricity from surplus regions to deficit regions across all power sources—thermal, nuclear, hydro, solar, and wind. The grid is monitored continuously through an Energy Management System that collects data every two minutes and even more granularly through synchrophasors every 40 milliseconds. Planners rely on computer simulations to model worst-case demand-supply scenarios, check inter-regional transfer capacities, and maintain compliance with grid regulations. Cross-border transfers also play a role in supporting system stability.
Despite advanced infrastructure, India continues to experience frequent power shortages. In 2020, the country reported an energy deficit of approximately 0.4%, leading to regular blackouts in major urban centres such as Delhi and Mumbai. The situation has worsened in recent years. By June 2024, India recorded its largest energy deficit in 14 years. Looking forward, projections suggest a significant power shortfall in 2025 and beyond, driven by electricity demand growing at an annual rate of 6%. India’s power requirement is expected to double by 2045.
Energy crises like this occur when demand exceeds available supply, causing blackouts, supply disruptions, and rising energy costs. In India, frequent power cuts affect both households and industries. The economic consequences are substantial. Unreliable power supply costs India about 1.9% of its GDP each year, amounting to billions of dollars in lost industrial output and higher costs from alternatives like diesel generators. For small and medium-sized enterprises, this translates into over US$ 10 billion in lost annual sales due to production interruptions and the lack of affordable backup power. On average, Indian households face around 10 power outages per month.
The roots of these problems are structural. Rapid demand growth from urbanisation and industrial expansion has overwhelmed existing systems. India remains heavily dependent on fossil fuels, with over 70% of its electricity coming from coal-fired plants. This not only accelerates resource depletion but also makes the country vulnerable to global price fluctuations.
Moreover, inefficient energy infrastructure compounds the issue. Many power plants are ageing, and outdated transmission networks contribute to high transmission and distribution losses, averaging around 15% in India—much higher than in developed countries like the US, where losses hover around 5%.
The variable nature of renewable sources like solar and wind is another big challenge. While they contribute significantly to the power mix, their supply is intermittent, especially during non-solar hours—those times of the day when solar radiation is unavailable. Although, India’s renewable energy capacity may have reached over 200 GW, but energy storage capacity remains under 5 GW as of the end of 2024. This gap underscores the need for deploying storage solutions like Battery Energy Storage Systems (BESS) and Pumped Storage Plants (PSP), which can store surplus solar energy produced during the day and supply it when demand increases during non-solar hours.
The Central Electricity Authority has identified flexible generation resources as critical to ensuring system reliability. Recommendations include scheduling power plant maintenance during low-demand periods, maintaining spinning reserves that can be deployed at short notice, and improving demand forecasting.
Regulatory and policy barriers, including bureaucratic delays and slow adoption of renewable technologies, further limit the sector’s ability to modernise and meet future demand effectively.
Another key reason, why India experiences power cuts despite being a net exporter, is the financial health of its state-run power distribution companies, or DISCOMs. These entities buy power from producers and deliver it to consumers. However, most DISCOMs are heavily indebted. According to the International Energy Agency’s World Energy Investment 2025 report, India’s distribution companies had accumulated losses amounting to US$75 billion as of 2023.
This is because DISCOMs are often required to sell electricity at subsidised rates, especially to residential and agricultural users, while facing high transmission losses and struggling to collect payments. Even when power is available in the market, they may not have the financial resources to buy it, leading to supply rationing and load-shedding.
Long-term Power Purchase Agreements further complicate the situation. Producers often commit to selling power under rigid contracts that favour international buyers, who are considered more reliable in terms of payments. Electricity committed to a foreign country cannot easily be rerouted to meet domestic shortages. Adani Power’s plant in Godda, Jharkhand, for instance, was built specifically to supply Bangladesh and was not initially connected to India’s grid. Moreover, while India’s five regional grids are interconnected, inter-regional power transfer remains constrained—especially from surplus regions in the East to high-demand areas in the South and West.
To address these issues, India must prioritise strengthening the financial health of DISCOMs. Government bailout schemes such as UDAY and the Revamped Distribution Sector Scheme have aimed to reduce their debt burden, but sustainable solutions require tariff rationalisation, improved billing through smart meters, and reduced transmission losses.
Reforming power procurement is equally important. Tools like STELLAR, launched by the Central Electricity Authority, now help states forecast demand more accurately. Moving towards dynamic contracts would allow states to adjust procurement based on real-time needs, reducing waste and improving efficiency.
Finally, India must upgrade its grid infrastructure to handle larger, more variable power flows. Expanding inter-regional transmission corridors and accelerating investment in energy storage will be crucial.
India’s electricity challenge is not about choosing between powering homes and exporting energy. It is about building a system capable of doing both effectively. By addressing financial, regulatory, and infrastructure gaps, India can ensure reliable power for its citizens while continuing to play a key role as a regional energy provider.
You must be logged in to post a comment.
Stay ahead in the dynamic world of trade and commerce with India Business & Trade's weekly newsletter.