FINWIRES · TerminalLIVE
FINWIRES

India's Rising Cooling Demand Strains Power System as Heatwaves Intensify, IEA Says

By

India's electricity system is facing growing stress from surging nighttime cooling demand as extreme heatwaves, rising incomes, and rapid air conditioner adoption drive record power consumption, the International Energy Agency said in a note on Wednesday.

IEA strategists said electricity demand in India has been growing about 5% per year since 2019, supported by economic expansion and population growth.

The analysts said peak demand reached 270 gigawatts on May 21, up from about 180 GW in 2019, reflecting one of the fastest sustained increases globally.

The IEA said the challenge is shifting to nighttime hours, when solar generation drops while air-conditioning demand remains elevated. Cooling can account for up to one-third of electricity consumption on hot summer nights, as temperatures remain high after sunset.

Average nighttime temperatures in India are rising at about twice the rate of daytime temperatures, amplified by climate change and the urban heat island effect in densely built-up cities.

The IEA said extreme heatwaves in northwest and central India in May saw daytime temperatures reach up to 48 degrees Celcius, further driving electricity demand.

Though solar photovoltaic capacity has expanded rapidly, accounting for about two-thirds of generation capacity additions since 2019, the technology cannot support evening and overnight peak demand.

India added a record 50 GW of solar capacity in 2025, helping meet daytime consumption but leaving a gap during peak "net load" hours around 8 p.m.

"India's summer peak net load typically occurs around 8 p.m., and it declines slowly through the early hours of the morning," the IEA said, adding that net load at 4 a.m. is only about 10% below peak levels, highlighting persistent overnight demand.

Renewable energy supplied about one-quarter of electricity at peak demand on May 21, while coal remained the backbone of system reliability. India's coal fleet provided 45 GW of ramping flexibility and reached about 92% of available capacity at peak.

However, the IEA said India's system is operating with tight reserve margins, with dispatchable capacity running close to 90% of availability during peak periods, leaving limited buffer for outages or demand spikes.

The IEA said cooling demand is projected to more than double by 2035 under current policy settings, with air conditioning penetration still at about 20% of households. Cooling already accounts for just over 10% of India's annual electricity use.

Related Articles

Commodities

Global Rebalancing Offset Oil Supply Shock, Kpler Says

The global oil market has largely absorbed what initially appeared to be a near-20 million barrels-per-day disruption following the closure of the Strait of Hormuz, with prices and refining margins easing despite continued constraints on flows in the Middle East, according to a Thursday note from Kpler.Kpler analyst Sumit Ritolia said the expected supply shock has been offset through a mix of demand destruction, inventory draws, strategic stock releases, and large-scale trade re-routing. The result has been a rapid rebalancing rather than sustained price escalation.China has emerged as the key swing factor, with seaborne crude imports falling to a decade low of 6.7 mmb/d in May, sharply reducing regional competition for barrels.At the same time, global refinery runs are estimated to have been about 5.6 mmb/d below pre-crisis expectations between March and May, significantly cutting crude demand.On the supply side, exporters have adapted quickly. Combined shipments through Saudi Arabia's Yanbu terminal and the UAE's Fujairah hub have increased by roughly 3.7 mmb/d as producers maximize alternative export routes, including pipelines bypassing Hormuz.West of Suez exports have risen by 3.2 mmb/d, with flows to Asia up 2.5 mmb/d despite sharply wider arbitrage spreads, underscoring security-of-supply-driven trade flows.Inventory measures have also played a key role. The OECD and partners, including the US and Japan, have released emergency stocks, while commercial inventories and oil-on-water volumes have been drawn down to bridge immediate gaps.The adjustment has been reinforced by refinery run cuts across Asia, the Middle East, and parts of Russia, partially offset by higher utilization in the Americas and select emerging markets.Despite the apparent stabilization, Kpler cautions that the balance is being maintained through finite mechanisms. Strategic reserves, unusually low imports, and inventory depletion cannot be sustained indefinitely. The current equilibrium reflects adaptation under constraint rather than a return to normal market flexibility.

Commodities

US Natural Gas Update: Prices Jump on Small Inventory Build

US natural gas futures climbed in midday trading Thursday after government data showed a smaller-than-expected storage build.The front-month Henry Hub contract and the continuous contract both rose by 4.29% to $3.352 per million British thermal units.The rally followed data from the US Energy Information Administration showing working gas in underground storage increased by 95 billion cubic feet for the week ending May 29. That came in below analyst expectations for a 99-105 Bcf build.Total inventories now stand at 2,578 Bcf, 3 Bcf below year-ago levels but 138 Bcf above the five-year average of 2,440 Bcf, and remain within the historical range.Pinebrook Energy Advisors noted this is the first time since February that stocks have dipped below year-ago levels and the surplus to the five-year average narrowed modestly following the smaller build.Prices were already trending higher ahead of the storage release, supported by hotter weather forecasts that are expected to lift cooling demand. Forecast models point to widespread 90-degree Fahrenheit-plus temperatures across major Northeast population centers.Tradition Energy analyst Gary Cunningham said the heat could "firm up the fundamentals for the remainder of summer" and potentially test new Champlain Hudson Power Express transmission line into New York City as cooling demand there is expected to surge.NatGasWeather.com said it expects to upgrade its demand outlook to "Moderate" from "Low" on Friday as the heat spreads across much of the US, including triple-digit readings in parts of the Southwest.On the export side, LNG feedgas flows remain under pressure from scheduled maintenance. Barchart, citing data from BNEF, said US export feedgas flows were running near 17 Bcf/d on Wednesday, down roughly 3 Bcf/d from typical capacity utilization above 20 Bcf/d.In global LNG markets, spot prices were up. EnergyNow.com, citing LSEG data, said prices up rose roughly 75% from February levels, to $18.20/MMBtu.Earlier spikes reached $25.30/MMBtu in March following disruptions tied to an attack on QatarEnergy's Ras Laffan LNG facility. However, prices remained far below the record spike to $70.50/MMBtu seen in 2022 after Russia's invasion of Ukraine triggered a global supply shock, it said.

Commodities

US Crude Inventories Drop 8 Million Barrels, Cushing Hits New 5-Year Low, TPH Says

US commercial crude inventories fell by 8 million barrels last week, pushing stocks 1% below year-ago levels and 4% below the five-year average, TPH Energy said Thursday.Cushing crude inventories declined by 600,000 barrels to 22.4 million barrels, marking another five-year low, the firm said.Higher crude exports supported the draw as outbound shipments increased by 1.43 million b/d, outweighing a 1.19 million b/d increase in imports, TPH said.The firm said the inventory decline also reflected a 349,000 b/d drop in the adjustment factor and an 8,000 b/d decrease in domestic production to 13.707 million b/d.Four-week average crude imports remained 4% below year-ago levels, while four-week average crude exports increased 42% from a year earlier, according to TPH.Refiners reduced crude processing rates by 90,000 b/d, leaving refinery runs 1% below year-ago levels, the firm said.Ethanol inventories fell by 400,000 barrels to 24.6 million barrels as exports strengthened, although inventories remained at a seasonal high while production reached another five-year high, TPH said.Gasoline inventories increased by 3.4 million barrels and distillate stocks rose by 1.5 million barrels, missing consensus forecasts for declines of 2.5 million barrels and 2 million barrels, respectively, TPH said.Jet fuel inventories also climbed by 400,000 barrels, although gasoline, distillate and jet fuel demand remained stronger than year-ago levels despite weaker week-over-week consumption, the firm said.The four-week average for light product demand improved to 1% above year-ago levels from 1% below previously, while net export growth slowed to 60% from 72%, with gasoline demand at 1%, distillate at 1% and jet fuel at 0%, TPH said.