India's electricity challenge is no longer about generating power; it is about building the systems that can store, transmit, and deliver it reliably
India’s electricity ecosystem is entering a critical phase. In May 2026, India’s peak power demand crossed 270 GW, driven largely by a sharp increase in cooling requirements across households, commercial establishments, and industries. This challenge extends beyond managing summer peaks. With urbanisation, industrial growth, and rising incomes, electricity demand is expected to continue increasing in the coming years. As climate change intensifies, the pressure on India’s power system is likely to become more frequent and severe.
Meeting this growing demand through conventional sources alone is neither economically nor strategically viable. Consequently, much of India's future demand growth will need to be met through renewable energy. The challenge, however, is that renewable integration requires a fundamentally different electricity system, one that can store power, balance variability, expand transmission networks, and coordinate planning across states.
The challenge before India's power sector is no longer simply generating more electricity, but ensuring that clean electricity can be reliably transmitted, stored, financed, and delivered across increasingly complex state-level power systems.
The Draft Electricity Amendment Bill, 2025, recognises several of these emerging challenges. Yet while the Bill updates the rules governing the electricity sector, it does not sufficiently address the system architecture required for a renewable-energy-led power system. The challenge before India's power sector is no longer simply generating more electricity, but ensuring that clean electricity can be reliably transmitted, stored, financed, and delivered across increasingly complex state-level power systems.
Figure 1: Frequency Profile for 21 May 2026 (peak demand: 270.8 GW)
Source: Grid India
Renewable energy capacity has crossed 280 GW, and non-fossil sources now account for over half of India's installed power capacity. Presently, nearly all households are connected to the grid. However, with peak demand expected to reach 300 GW in the coming years and electricity demand increasing by 7–8 percent in multiple states, the challenge is no longer just about capacity addition.
As renewable penetration increases, reliability rather than capacity becomes the defining constraint. Solar generation peaks during the day, while electricity demand often peaks in the evening. Wind generation is seasonal and variable. Managing these fluctuations requires a power system capable of storing, balancing, and dispatching electricity as needed.
This is where deploying storage systems becomes critical. By storing surplus renewable energy and releasing it when needed, storage helps bridge the gap between when electricity is generated and when it is consumed. Yet, storage deployment remains at less than 1 GWh operational and around 35.8 GWh under construction. This is marginal compared to what is required, as India will need 61 GW(218 GWh) of energy storage capacity by 2030.
As renewable penetration increases, reliability rather than capacity becomes the defining constraint.
The electricity bill acknowledges some of these emerging challenges by legally recognising Energy Storage Systems (ESS) within the electricity ecosystem. However, the Bill does not establish a framework where states can assess their storage requirements based on projected renewable capacity and growth. There is no statutory obligation on DISCOMs or State Electricity Regulatory Commissions (SERCs) to integrate storage into their resource adequacy planning, nor does it establish mechanisms for monitoring state-level preparedness as renewable penetration increases.
Rajasthan requires 13 GW of storage capacity by 2030, compared to 7.8 GW in Telangana, 6.7 GW in Uttar Pradesh, 6.6 GW in Maharashtra and 6.3 GW in Gujarat (Figure 2). However, the draft bill treats storage as a national-level issue, rather than a differentiated federal challenge.
A stronger reform framework through the Bill would require every state to prepare an Integrated State Reliability Plan. Developed jointly by State Electricity Regulatory Commissions (SERCs), DISCOMs, and State Load Dispatch Centres, these plans could help assess storage requirements, identify renewable integration bottlenecks, establish curtailment protocols, and prepare states for future reliability challenges.
Figure 2: State-wise Energy Storage Capacity Requirements by 2030
Source: India Energy and Climate Center
India’s energy transition will ultimately be implemented not by the Centre but by states. Renewable energy projects are approved on state land, connected through state transmission systems, procured by state utilities, and regulated by state institutions.
The Bill acknowledges this reality by assigning State Electricity Regulatory Commissions (SERCs) the role of promoting the procurement of non-fossil electricity and implementing Renewable Purchase Obligations (RPOs). However, without strong provisions for state-specific planning, regulatory capacity, and institutional support, the Bill risks reducing states to compliance agencies rather than architects of the transition.
This is particularly important because regulatory capacity across states is highly uneven. For instance, Maharashtra, Karnataka, and Gujarat have built relatively sophisticated regulatory institutions capable of managing tariff reforms, renewable integration, and market innovation. Other states continue to face staffing shortages, delayed tariff orders, and limited technical expertise.
India’s energy transition will ultimately be implemented not by the Centre but by states. Renewable energy projects are approved on state land, connected through state transmission systems, procured by state utilities, and regulated by state institutions.
The Electricity Bill should establish a framework to strengthen regulatory capacity across states through technical assistance, knowledge-sharing platforms, and performance-linked support for regulatory reforms. SERCs should be explicitly empowered to design state-specific instruments such as time-of-day tariffs, demand response programmes, and storage-linked procurement mechanisms. For instance, Maharashtra has mandated that its DISCOMs procure storage capacity equivalent to at least 10 percent of their overall demand by FY 2035–36, a mandate that other states can follow.
The Bill establishes clearer rules for the routing of electricity lines and sets out a proper compensation process. It allows multiple electricity suppliers to share the same network, thereby lowering transmission costs. These reforms may improve procedural efficiency, but they do not address the most significant barrier facing renewable integration today: financing.
Fifty gigawatts (50 GW) of renewable energy is stranded in India because transmission lines have not been built quickly enough to connect generation centres with demand centres. The reasons are well known: DISCOMs are financially stretched, private investors find certain projects commercially unfeasible, and there is no dedicated funding mechanism to fill this gap.
The gap is particularly important in intra-state transmission systems. India is required to invest approximately INR 4.91 lakh crore (US$ 59 billion) during the 2027–2032 period to expand and modernise its power transmission infrastructure. Out of this, INR 3.91 lakh crore is earmarked for inter-state transmission systems. Only INR 99,296 crore has been allocated for intra-state systems.
The financial challenges are similar in storage and grid modernisation. The government is implementing two Viability Gap Funding (VGF) schemes for approximately 43.8 GWh of battery storage. However, projected investment requirements for energy storage are US$40–50 billion (INR 3–4 trillion) by 2032. Yet the Bill does not create any enduring state-level financing mechanism to address these needs.
A possible first step through the Bill is to establish a state grid and storage transition fund to support intra-state transmission upgrades, storage deployment, and land compensation. Such a fund could combine grants from the central government, concessional multilateral finance, and private capital.
The Bill must now take the necessary steps to ensure that India’s power sector is designed not only to generate clean electricity but also to deliver it when and where it is needed most.
The Draft Electricity (Amendment) Bill, 2025, is an important attempt to modernise India’s electricity sector. It recognises several of the emerging realities of a renewable-energy-driven power system and introduces long-overdue reforms.
The challenge before policymakers is therefore not one of generation, but one of system architecture. Reliability planning, state-level institutional capacity, and transmission financing will determine whether India’s renewable energy transition delivers affordable and reliable electricity or merely creates additional capacity on paper.
The Bill must now take the necessary steps to ensure that India’s power sector is designed not only to generate clean electricity but also to deliver it when and where it is needed most.
Radhey Wadhwa is a Research Assistant, Climate Change and Energy, Centre for New Economic Diplomacy (CNED) at the Observer Research Foundation.
The author acknowledges the use of ChatGPT 5.5 for language editing and grammatical refinements before submission. All research, analysis, and conclusions are solely those of the author.
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Radhey Wadhwa is a Research Assistant with the Climate Change and Energy vertical at the Centre for New Economic Diplomacy (CNED). His research focuses on international ...
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