The Age of Electricity Meets India’s Grid Test

Electricity consumption is widely regarded as a strong coincident indicator of economic activity because, until recently, it had to be consumed upon production and could not be stored on a utility scale. Although the first such storage facilities appeared in the early 20^th century, modern battery storage emerged much later, with major utility-scale lithium-ion demonstrations beginning around 2012.

Accordingly, nighttime luminosity captured by satellites and the more accurate visible infrared imaging radiometer suite have been used to track economic activity, particularly where traditional data are limited or unreliable. The advantage is that it can include informal activity, whereas it is less accurate in rural areas with low energy access, and sometimes also in highly developed areas where growth does not necessarily mean more light.

It also struggles to distinguish between specific types of economic activity. It is useful, therefore, to assess the evolving profile of electricity, both trends and twists, to judge how closely it mirrors economic activity.

Global Trends
As the earth warms and heat waves become more intense and frequent, global electricity demand is outpacing economic growth.

According to the International Energy Agency, worldwide electricity demand grew by 3% year-on-year in 2025 on top of 4.4% in 2024. This is set to become a broader trend — it will increase at a brisk pace over the rest of the decade to be 50% higher than the average for the previous decade.

Emerging economies will account for nearly 80% of additional electricity consumption, led by China, which is expected to add demand equivalent to the total electricity consumption of the European Union today. Close behind are India and Southeast Asia. Electricity demand in advanced economies is accelerating again after 15 years of stagnation, driven by artificial intelligence, data centres and advanced manufacturing. 

Half of the world’s electricity supply will be generated from renewables by 2030, led by solar and nuclear, and overtaking coal, which will, however, still remain the single largest source of electricity. The world will have to develop faster and more efficient expansion of grids and grid-related supply chains to securely and cost-effectively integrate a changing mix of generation and storage. 

Grid-enhancing technologies and regulatory reforms can also unlock capacity currently stuck in queues worldwide. Utility-scale battery deployment is accelerating rapidly and will become a significant source of short-term flexibility as battery costs decline.

The power sector is the largest source of global greenhouse gas emissions, accounting for about 30% of total emissions. Here, there is a welcome twist. Carbon dioxide emissions from electricity generation remained flat in 2025 and will plateau over the 2026-2030 period as renewables and nuclear continue to account for a growing share of generation, steadily reducing the CO2 intensity of electricity generation.

Affordability remains a key concern, with household electricity prices in many countries rising faster than incomes since 2019. Non-energy components — such as network charges, taxes and other levies — continue to account for a large, and often growing, share of household bills. In addition, electricity is also taxed more heavily than natural gas in many countries, weakening incentives for households to electrify heating, cooking or hot water use. Improving affordability will be the key challenge for all countries, for it holds the key to wider electrification.

Indian Experience, Outlook
Even as average wholesale electricity prices in 2025 rose year-on-year in several regions and countries, including in the European Union and the United States, they fell in India.

Fewer heatwaves in the summer and an early onset of the monsoon season led to demand growth slowing in 2025 to 1.4%, the weakest since the early 1970s, excluding the decline seen in 2020 during the pandemic. Slower industrial activity also contributed to the moderation in demand growth. Over the next five years, however, electricity demand is expected to rebound in line with economic activity, expanding cooling needs due to rising income levels, increasing industrial output, and escalating power consumption in agriculture and transport.

Renewable electricity generation grew by 20% in 2025, the strongest annual increase in the last decade. Solar photovoltaic generation expanded by a decadal high of 24%, boosted by substantial cost declines. Solar PV is projected to add more than 300 tera-watt hours over the next five years. Wind electricity generation also expanded robustly in 2025 and is forecast to grow at a steady average annual rate of over 8% through 2030. Hydropower rose by 14% year-on-year in 2025, up from 2.5% in 2024, but its outlook is more mixed, with a declining share in total supply despite capacity additions.

India has already achieved 50% of its installed capacity from non-fossil fuel sources ahead of its 2030 target. Between 2026 and 2030, India is expected to add almost 300 gigawatts of renewable power capacity, reflecting its national schemes-driven goal of a self-reliant clean energy supply chain.

India’s power sector is now shifting its focus to system integration and long-term reliability to align renewable expansion with grid strength and financial discipline. A task force for India Energy Stack has been mandated to develop a Digital Public Infrastructure for the power sector by creating a connected and interoperable energy ecosystem through a utility intelligence platform in collaboration with selected power distribution companies. Built on standardised open APIs and protocols, this platform should be able to integrate data from across IT systems, enhancing innovation, operational efficiency, and informed decision-making. Reforms in distribution should focus on improving financial sustainability and service reliability, including smart metering.

India is also looking to nuclear power as a key part of its energy security and decarbonisation strategy with the newly announced Nuclear Energy Mission, which includes a target of 100 GW of nuclear capacity by 2047. The strategy is to crowd in private sector participation in the development and deployment of advanced nuclear technologies, such as small modular reactors or SMRs.

Coal-fired generation will maintain its role as the main source of electricity, with a share of around 60% in 2030. This dominant role of coal makes India's electricity sector one of the world's most carbon-intensive power sectors, with emissions exceeding 1.2 billion tonnes annually. The grid emission intensity is roughly 0.70-0.82 kg per kilowatt hour. Total CO2 emissions from electricity generation fell by more than 3% year-on-year in 2025, the first decline since 2020. Emissions from power generation are forecast to resume growth, however, as coal continues to provide a significant portion of power to meet industrial and cooling demand. Aligning with the net-zero 2070 goal requires a dramatic reduction in coal dependency.

As the age of electricity reaches its zenith, perhaps electricity will be a good concurrent indicator of green, clean economic activity worldwide and in India.