Power demand in the country fell 4.3% on-year in May to 149 billion units (BUs), compared with 155 BUs in the corresponding month last year, as average temperature during the month was unusually low amid "unseasonal rainfall" in several parts of the country, according to a Crisil Intelligence report.

"Rains were the primary reason for lower power demand in May. Through the remainder of the year, however, offtake from industrial and commercial consumers will dictate the trajectory of power demand. The two segments account for nearly half of India’s power demand and, therefore, the continuing expansion of relevant activities will be crucial for a rise in power demand."

Power demand in the North decreased 8% YoY

Rainfall in the northwest region, which, as per the Indian Meteorological Department’s classification, includes north India, was 31% above normal during the month. This was contrary to what we saw in May 2024, when there were severe heatwaves and rainfall was 66% below normal. The central India and the southern peninsula also recorded high deviation in rainfall at 443% and 171%, respectively, above normal.

Overall, rainfall during the month was "91% above the normal", at 103.5 mm of rainfall between May 1 and May 28 as against the historical average of 56.8 mm. This time, the southwest monsoon also arrived about 8 days early, the earliest date of the onset of the monsoon since 2009.

The power demand is also expected to have declined due to easing industrial activity as indicated by the Purchasing Managers’ Index (PMI) data. The seasonally adjusted India PMI, a proxy to gauge the country’s industrial activity, printed a three-month low of 57.6 in May.

Lower power offtake led to lower prices in the short-term market

While May 2024 was characterised by record temperatures and peak power reaching a high of 250 GW, a cooler month this year resulted in lower peak demand, which percolated into prices in the short-term power market. The average market clearing price (MCP) in the real-time market (RTM) declined 28% on-year to Rs 3.43/unit in May 2025, indicating ample availability amid tepid electricity volume requirement.

Generation falls in sync with demand; share of renewable energy up

Tracking the decline in power demand, generation declined 4.1% on-year to 160 BUs in May. Fuel-wise, coal-based power generation fell 7.4% on-year vs a rise of 13% on-year in May 2024. While generation from thermal power declined on-year this May, generation from clean energy sources, i.e. nuclear, hydro and renewable energy, increased. Nuclear energy rose 14.7% on-year on account of increased generation from the recently commissioned RAPP-7, whereas higher rainfall resulted in a 14.8% on-year rise in hydro power generation. And renewable energy rose 10.4% on-year.

Consequently, coal accounted for 69% of the total power output vs 72% a year ago, which also highlighted the easy ability of the fuel to be ramped up or down in times of high or low power demand.

Coal inventory improves on lower generation

Coal remains the primary fuel to generate electricity in India. As of May 31, thermal power plants had 60 million tonnes (MT) of coal stocks as against 48 MT a year ago. The improvement in coal inventory during the month was supported by a 2.3% on-year rise in coal despatch to power plants as well as lower generation. Consequently, as of May 31, coal inventory had improved to 21 days vs 16 days in May 2024.