A sharp and unexpected surge in electricity consumption marked the end of 2025 in India, breaking a prolonged period of subdued demand. The national peak power demand hit 241 gigawatts (GW) on 31 December 2025, driven by a severe cold wave across northern and central states. This winter spike highlights the critical influence of weather on the country's power dynamics, affecting everything from distribution company finances to the tariffs consumers eventually pay.
What Drove the December Power Demand Surge?
Electricity use traditionally rises during the winter months of December and January as dropping temperatures lead to increased use of heaters and other warming appliances. This year, the trend was amplified by an intense cold wave. Regions including Jammu & Kashmir, Himachal Pradesh, Haryana, Punjab, Rajasthan, Delhi, and Madhya Pradesh experienced significantly low temperatures, with some areas recording readings as low as 4 degrees Celsius. Notably, Delhi witnessed its coldest December day in six years on the last day of 2025.
Consequently, national peak demand climbed steadily from 206 GW on 1 December to the 241 GW recorded on the 31st. Overall power consumption for the month reached 138.39 billion units (BU), marking a nearly 7% year-on-year increase from the 129.39 BU consumed in December 2024. The rise was primarily attributed to heightened usage in households and commercial establishments.
Why a Demand Spike Matters for Consumers and Discoms
A sudden jump in electricity demand has significant ripple effects. Power distribution companies (discoms) typically secure the bulk of their supply through long-term Power Purchase Agreements (PPAs), which can span up to 25 years. However, when demand exceeds these pre-arranged supplies, discoms are forced to buy additional power from short-term markets like power exchanges.
During periods of high demand, prices on these exchanges can spike dramatically. The higher procurement costs strain the already fragile finances of many discoms. Ultimately, these increased costs are often passed on to consumers through higher tariffs in subsequent regulatory approvals. In simple terms, a sharp demand spike today can lead to heftier electricity bills for households and businesses in the future.
2025: A Year of Muted Demand with Notable Exceptions
Despite the December surge and a brief increase in July, 2025 was largely a year of softer-than-expected electricity demand. The summer peak demand stood at 242 GW on 12 June 2025, which was considerably lower than the Central Electricity Authority's (CEA) projection of 270 GW. The all-time high of 250 GW was recorded back in May 2024.
The primary reason for this muted demand was excess rainfall and an extended monsoon season, which kept summer temperatures in check. Furthermore, unseasonal rains in October 2025 dampened the typical post-monsoon demand recovery. This led to a 6.0% contraction in power demand in October and a 0.8% drop in November. As a result, overall electricity demand growth for the financial year 2025-26 (FY26) is estimated at a modest 1.5-2%, compared to 4% growth in FY25.
Market Impact: Lower Prices Ease Pressure on System
The softer overall demand throughout most of the year pushed down prices on power exchanges, providing some financial relief. The average price on the day-ahead market (DAM) of the Indian Energy Exchange (IEX) fell to ₹3.99 per unit in 2025, down 12.9% from ₹4.59 in 2024. Similarly, prices on the real-time market (RTM) averaged ₹3.75 per unit, a decline of 14.6% from the previous year.
These lower exchange prices reduce the cost for discoms when they need to meet unexpected demand and minimize the risk of extreme price surges during shortages. The beneficiaries of this scenario are primarily the discoms and, indirectly, consumers who face lower risks of blackouts. Power generators operating on coal and gas, however, are largely insulated from short-term demand swings as most of their capacity is tied to long-term PPAs that guarantee fixed cost recovery.
Improved Supply and a Positive Outlook for 2026-27
On the supply side, conditions have improved markedly. After facing coal shortages in 2021 and 2022, stepped-up domestic coal production, which now exceeds 1 billion tonnes annually, has alleviated concerns. Additionally, India added a substantial 44.5 GW of renewable energy capacity in 2025, diversifying its energy mix.
Looking ahead, demand is expected to rebound. Rating agency ICRA Ltd estimates electricity demand growth of 5-5.5% in FY27 (2026-27). This projection is based on expected GDP growth, normalised weather patterns, and robust demand from emerging sectors like electric vehicles, data centres, and green hydrogen. The International Energy Agency (IEA) forecasts an even stronger average annual growth of 6.3% for India during 2025–27.
The combination of subdued demand and improved supply in 2025 has provided a much-needed respite to India's power system, lowering prices, reducing shortage risks, and giving policymakers more flexibility to manage future demand volatility.
