India’s power sector is expected to recover in the coming year, though a sharp rebound in demand is unlikely, according to Bernstein’s India Power Outlook 2026 report.
Power demand fell about 0.7% in the first nine months of fiscal year 2026 (FY26), after growing 7% and 5% in the previous two years. Bernstein forecasts demand to rise around 5% in FY27, supported by a favourable base from May, although weather conditions are not expected to provide a significant boost.
On the supply side, India added a record 41 gigawatts (GW) of power capacity in FY26 through November, with total additions for the year projected to reach 55 GW. Renewables accounted for approximately 42 GW of this growth, while thermal capacity contributed around 9 GW.
The report expects renewable capacity additions to moderate to roughly 35 GW in FY27 due to slower tendering, grid constraints, and reduced government support, while thermal additions are expected to continue at about 8 GW.
Bernstein highlighted that demand-supply dynamics over the next three years will hinge on battery energy storage system (BESS) deployment. While planned storage projects could ease shortages, the report does not anticipate a substantial power surplus until after FY31, when additional dispatchable capacity is likely to come online.
Key positive developments include potential progress on power distribution company (DISCOM) reforms, including amendments to the Electricity Act and possible moves toward privatization. A DISCOM bailout package is also expected, though implementation may take time.
Nuclear energy is another bright spot, following parliamentary approval of a bill allowing private sector participation, reducing liability for smaller reactors, and limiting recourse on equipment suppliers.
Battery storage is set to play a growing role, with over 30 GW of BESS tendered in recent years and around 6 GW expected to become operational this year. While this could reduce peak shortages, aggressive bidding by smaller players may create localized stress points. Data centres are also seen as a potential catalyst for the sector, with firm power offtake agreements potentially driving a broader sector re-rating.
On the downside, Bernstein remains cautious on renewables, citing the withdrawal of incentives, DISCOM resistance to rooftop and commercial solar, ongoing grid constraints, and slower capacity additions.
