India's power demand to see stronger growth in H2: Bernstein report

India's power demand is expected to see stronger growth in the year's second half, driven by hotter weather from an early El Nino and structural factors like data centers, a Bernstein report finds, revising growth estimates upwards for CY26 and FY27.

India's power demand could see a stronger trajectory in the second half of the year, with improved weather conditions and structural demand drivers supporting the sector, according to a report by Bernstein. The report notes that long-term confidence in growth prospects appears to be returning.

Key Growth Drivers

Bernstein said there are three key tailwinds supporting utilities at present: near-term demand growth on a low base along with supportive weather, long-term growth visibility from data centers, and defensive positioning amid global uncertainty.

Revised Forecast Amid Climate Shifts

In its outlook for calendar year 2026, the report said it had earlier expected a power demand growth reversal to around 5 per cent after a flat CY25. However, recent climate developments indicate the possibility of a hotter second half of the year. The transition from La Nina conditions, characterized by cooler ocean temperatures, to El Nino conditions, which typically bring higher-than-normal temperatures and lower rainfall, is expected to begin earlier than anticipated. As a result, higher temperatures and reduced rainfall compared with historical trends are expected from May onwards.

After an improvement in December-January, India recorded about 1 per cent growth in power demand in February 2026. March demand is expected to remain similar. Based on updated weather projections, the report revised its expectations for power demand growth in FY27 upward to around 0.9 times real GDP growth, from 0.8 times earlier.

Long-Term Projections

Over the longer term, Bernstein continues to expect power demand growth to broadly track real GDP growth, driven by electrification trends and potential demand from data centers. The International Energy Agency has also revised its projections upward, increasing India's power demand compound annual growth rate estimate to 6.4 per cent for CY2025-2030, compared with 5.5 per cent earlier for CY2024-2035.

The report also revised CY26 demand growth to around 6 per cent year-on-year, compared with an earlier estimate of about 5 per cent. Demand growth is expected to improve further from June onwards.

Implications for Power Sector Segments

Higher demand could support the entire power sector and associated capital expenditure value chain. However, Bernstein noted that merchant power prices may not rise significantly because of the upcoming addition of thermal supply. Construction companies could benefit from the push for additional thermal capacity, while long-term nuclear capacity requirements may also increase. For renewable energy, stronger demand could lead to the signing of more power purchase agreements and lower curtailment levels.

The report added that hydro power players and possibly wind asset owners could face downside risks if wind speeds remain weaker than expected. (ANI)

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