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Breaking Down India’s Power Demand Recovery after Lockdown: Key Figures and Future Outlook
This is the first part of our blog series reflecting on the major challenges and opportunities for India’s power sector

Dhruvak Aggarwal, Danwant Narayanaswamy, Shalu Agrawal
25 March 2021

Exactly a year ago, India went into a complete economic lockdown intending to contain the Covid-19 pandemic in its nascent stage. As the economy stalled, the electricity demand nosedived (Figure 1). On 22 March 2020, the day of voluntary ‘Janata curfew,’ daily power demand dropped by 15% on a year-on-year (y-o-y) basis. The following week, demand dropped by 28% relative to the previous year.

Our earlier blog series unpacked the sudden drop in demand and its implications for India’s power sector. However, following the initial crash, daily power demand resurfaced. By July, demand was back to the previous year’s levels. By September, demand exceeded the last year’s levels. The resurgence in power demand seemed to defy the expectations of economic contraction. In this blog, we reflect on the nature and drivers of demand recovery over the past year and anticipate trends for the upcoming summer.

 

Power demand traced the fall and recovery in economic activities

Electricity demand is a reliable indicator of economic activity. As Figure 2 shows, power demand in India recovered in line with the rise in commercial and industrial (C&I) activity, as reflected in the Purchasing Managers’ Index (PMI) trends. The y-o-y change in monthly demand is strongly correlated (0.88) with the composite PMI values observed between March 2020 and February 2021. However, demand recovered fastest in the Northern region, while the Southern region demand continues to be below the previous year levels.

 

States with more domestic and agricultural (D&A) loads witnessed a higher increase in demand

After the lockdown, states with a higher share of D&A consumption, such as Karnataka and Madhya Pradesh, saw a moderate fall followed by a significant rise in power demand (Figure 3). In comparison, states with large shares of C&I consumption saw a sharp decrease in demand followed by a moderate increase. Gujarat, Odisha, Uttarakhand, and Himachal Pradesh witnessed a y-o-y fall in demand in April by 44%, 35%, 80%, and 92%, respectively. As restrictions were eased in the build-up to the festive season in October-November, power demand in these states rebounded, mainly on the back of pent-up demand for products and services.

The variation in economic recovery across sectors explains these trends better. In FY 21, India’s agricultural sector is expected to grow by 3.4%, while the industrial and services sectors are estimated to contract by 9.6% and 8.8%, respectively. Domestic power consumption may have driven the rise in demand, with consumers restricted to their homes during the summer months.

 
 

Note: Values in brackets display the share of C&I consumption in states.

All-India peak power demand touched an all-time high in winters

In January 2021, all-time peak demand levels in India were successively breached four times, from the previous high of 182.6 GW on 30 May 2019 to 189.6 GW on 31 January 2021 (Figure 4). For the first time in at least four years, the morning winter peak demand is the highest annual peak, surpassing the afternoon summer peak. These may be due to higher heating loads and increasing economic activity. These trends indicate how the power demand in India is increasingly becoming peakier, driven by rising energy demand for cooling/heating. In the summers of 2021, most of Northern and Western India is likely to experience above normal minimum temperatures. The pent-up demand for air-conditioners may further push up the all-India peak.

 

Broad trends suggest that power demand traced economic recovery and consumptive energy use in Indian homes and farms. However, an increasing gap between the wealthier and poorer households and a decline in labour force participation has accompanied this recovery. This raises concerns about the affordability of electricity consumption, as manifested in the dropping payment rates and spiralling financial burden of power distribution companies. Non-payments during the high-consumption summer months could exacerbate this issue. Rising temperatures and pent-up demand for ACs could mean that domestic consumption and peak-demand may scale new heights this summer and make it more challenging to meet the country’s power needs in an affordable yet sustainable manner.

Our upcoming blogs will discuss potential strategies to turn India’s grid greener, supply-reliable, and distribution companies financially sustainable.

Dhruvak Aggarwal is a Research Analyst, Danwant Narayanaswamy is a Research Analyst and Shalu Agrawal is a Programme Lead at The Council. Send your comments to dhruvak.aggarwal@ceew.in.

Read Part 2: How did India’s Renewable Energy Sector Perform During the Year of COVID-19 Lockdown?

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