A new report by the Centre for Research on Energy and Clean Air projects an 18 TWh rise in coal-based power generation between July 2026 and June 2027. This increase is driven by higher cooling demand and lower output from wind and hydro sources due to El Niño conditions. For investors, this highlights the continued importance of thermal power in the energy mix as the sector works to balance renewable growth with grid stability.
India’s power sector faces a period of heightened climate-related stress as the onset of El Niño is expected to recalibrate the country's energy mix. A recent analysis by the Centre for Research on Energy and Clean Air (CREA) estimates that fossil fuel power generation may increase by 17.7 terawatt hours (TWh) over the next twelve months. This shift highlights the complex challenge of managing electricity supply during periods of extreme weather, where peak demand from cooling often outpaces the system's current ability to rely solely on non-fossil sources.
Impact of Weather on Power Generation
The projected rise in coal-fired generation is not just a function of energy shortages, but rather the result of a "triple-threat" scenario impacting the grid. First, rising temperatures are expected to lift total electricity demand by approximately 10 TWh due to the increased use of air conditioning and refrigeration. Second, a forecasted weaker monsoon season is likely to depress hydropower generation by 2.9 TWh. Finally, wind power output is also expected to fall, with a projected reduction of 4.9 TWh. Together, these factors create a supply-demand gap that is currently expected to be filled by thermal power stations.
While this scenario suggests a temporary reliance on coal, the long-term energy transition remains a focus. India significantly scaled its solar capacity by 44.6 gigawatts (GW) last year, which provided a buffer during the first five months of 2026. Thermal generation levels during that period actually remained below 2024 levels despite record-breaking electricity demand, thanks largely to a 33% increase in solar power availability. However, as the El Niño effects take hold, the reliability of these thermal assets becomes critical for grid stability.
Strategic Gaps in Grid Flexibility
The report emphasizes that building more solar and wind capacity alone may not be enough to manage these weather-driven shocks. Last year, grid operators had to curtail 2.1 TWh of renewable electricity because the system lacked the flexibility to integrate it while maintaining coal-fired plant operations. Experts suggest that integrating battery storage is essential to bridge this gap. Estimates indicate that just 10 gigawatt hours (GWh) of battery storage could have allowed the system to store surplus solar energy for use during peak evening hours, potentially reducing the need to ramp up coal plants.
For investors and policymakers, this situation clarifies that the next phase of India's energy evolution will likely involve higher spending on grid modernization and energy storage solutions. Companies involved in battery manufacturing, power transmission equipment, and smart grid technology are expected to remain central to the narrative of building a weather-resilient power infrastructure. The ability of the grid to manage these demand shocks will be a primary monitorable, as India continues to aim for its target of 500 GW of non-fossil power capacity by 2030.