India's power demand seen rising 6.5-7.5% this fiscal as hotter, drier weather boosts cooling needs: Crisil

India's electricity demand is expected to rise 6.5-7.5% year-on-year to 1,825-1,835 billion units (BU) in the current fiscal, driven by higher cooling requirements amid expectations of hotter temperatures and lower rainfall due to El Nino conditions, according to Crisil Intelligence.

The rating agency's research arm said rising temperatures and a potential rainfall deficit could spur greater use of air conditioners, coolers and other cooling equipment, putting additional pressure on electricity consumption.

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"Power demand is estimated to rise 6.5-7.5 per cent on-year this fiscal to 1,825-1,835 BU, driven by an expected rise in cooling demand due to higher temperatures and lower rainfall because of El Nino conditions", the report said.

The impact of hotter and drier weather has already been visible in electricity consumption. India's power demand rose 10.9% year-on-year to around 171 BU in July, the highest recorded for any month, compared with 2.6% growth in July last year.

Crisil attributed the sharp increase to higher use of cooling equipment amid a rainfall deficit linked to El Nino conditions.

India received 15% below-normal rainfall between June 1 and July 29, with the northwest, central and southern regions recording deficits of 10%, 1% and 26%, respectively. The impact was more pronounced in some states, the report said.

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Higher demand was accompanied by an increase in electricity generation. Power generation rose around 10% year-on-year to 182 BU in July, according to Crisil.

Most major sources recorded higher generation during the month, although gas-based and hydropower generation declined.

Renewable energy generation increased around 10% year-on-year, supported largely by higher installed capacity. India added 13.2 GW of renewable energy capacity, including small hydro, during the first quarter of the fiscal.

Hydropower generation, however, fell around 14% year-on-year in July as weaker rainfall reduced water availability.

The pressure on hydropower was also reflected in reservoir levels. The energy content of 31 reservoir-based hydropower projects stood at around 14 BU as of July 31, against a full-reservoir potential of about 34 BU. The corresponding level a year earlier was around 22 BU.

With power consumption expected to remain sensitive to weather conditions, Crisil said peak demand trends and the impact of temperature fluctuations on short-term electricity market prices would be key factors to monitor through the fiscal.