Above-normal precipitation this monsoon in India has curbed electricity demand and boosted hydropower generation, leaving coal-fired power plants with significantly higher stockpiles than a year ago.

Coal inventories at Indian utilities stood at 50.48 million tonnes at the end of August, up 27% from 39.70 million tonnes in the same period last year, according to data from the Central Electricity Authority (CEA). That was enough to cover over 16 days of consumption.

Heavy rainfall cooled temperatures and slashed the need for air conditioning, while simultaneously raising water levels in hydropower reservoirs. In August alone, rainfall was 5% above the long-term average, and September is forecast to see an excess of 9%, further dampening demand for power-hungry cooling systems.

Solar and wind generation also contributed strongly, pushing the share of clean energy generation in India's power mix to a record high.

India's electricity consumption has been sluggish throughout the year, falling short of the government's bullish forecasts. The Ministry of Power had projected a record-breaking peak demand of 270 GW during the summer months. The actual peak, however, reached 241 GW, below even the 250 GW peak registered in May 2024.

Until August, overall power demand in 2025 trailed behind last year's levels, only beginning to recover in recent weeks. According to ICRA, a domestic credit rating agency, power consumption declined by nearly 1.5% year on year in the first quarter of this fiscal year (ending March 2026) due to milder weather and above-average rainfall.

ICRA lowered its estimate of power demand growth for this fiscal year to 5.0-5.5% from the initial projection of 6.5%, compared to the overall demand growth of 4.2% in FY25.

The easing demand also softened electricity prices on India's power exchanges. Both the day-ahead and real-time market prices in August fell below last year's levels, driven by seasonal rainfall and cooler weather, local media reported.

Meanwhile, domestic coal production has continued to rise. Between April and August, India mined 73.92 million tonnes of coal from captive and commercial mines, a 12% increase year on year, showed government data.

This aligns with a broader government strategy to avoid the coal shortages that plagued the country in 2021 and 2022. Since then, authorities have worked to stabilize supply and ramp up domestic output.

Despite the current lull in demand, the long-term outlook for India's electricity consumption remains robust. Energy needs are expected to grow by approximately 6% annually, fueled by rising economic activity and the emergence of energy-intensive sectors such as electric vehicles, data centers, and green hydrogen production.

Post-COVID recovery has already driven a sharp rebound in demand. In response, New Delhi has set capacity targets of 80 GW of new coal-fired power and 500 GW of new non-fossil capacity by 2030.

Some analysts argued that the current glut in coal stocks may prove short-lived. As the monsoon season tapers off and economic activity accelerates, power demand is likely to rebound swiftly. Power producers, who have seen a modest drawdown of coal stockpiles in recent months, may soon ramp up consumption again.

The strong contribution of hydropower during the monsoon illustrates the promise of renewables, but also their intermittency, underscoring the need to maintain a resilient and flexible energy system in India.