Power puzzles in bright GDP

There are some apparent paradoxes visible in the data from the first quarter of 2025-26 (Q1FY26).

- DEVANGSHU DATTA

The gross domestic product (GDP) delivered a positive surprise with 7.8 per cent year-on-year (Y-o-Y) growth. But electricity consumption fell 1.5 per cent Y-o-Y, a drawdown not seen since the Covid lockdowns.

At first glance, the GDP data would seem overstated. Power consumption, which is metered, correlates closely with economic activity and is likely to be more accurate than GDP calculations. But there may be another explanation, one that indicates future challenges for the power sector.

High rainfall meant there were only 12 days with above-normal temperature and humidity, so cooling demand was low. Beyond industrial needs, the increasing penetration of air conditioners in middle-income households is contributing to cooling demand. Extrapolating, household cooling could account for 20-25 per cent of power demand by 2030, leading to demand surges in hot, humid weather.

One consequence of climate change is wild weather patterns. Power demand volatility is related to weather volatility. Generators and discoms will have to develop accurate forecasting models since capacity expansion, and generation mix must be calibrated to be financially viable when demand is low, and to ensure no supply shortfalls occur at peak demand. This will require smarter grids and much smarter forecasting.