ICRA Forecasts Moderate Power Demand Growth For FY2026 Driven By EVs And Data Centres

India's power demand is projected to grow at 5.0-5.5 per cent in FY2026, driven by electric vehicles (EVs), data centres and green hydrogen segments, credit rating agency ICRA said on Wednesday. 

The projected demand increase, while exceeding the 4.2 per cent growth recorded in FY2025, falls short of the 8.0 per cent expansion witnessed during the FY2022-2024 period. ICRA anticipates the national thermal power plant load factor will maintain stability at 70.0 per cent in FY2026, compared to 69.5 per cent in the previous fiscal year, as renewable energy sources contribute significantly to generation growth alongside an expected 9-10 GW addition in thermal capacity.

The EV sector shows promising expansion across multiple categories, with three-wheelers spearheading adoption rates, followed by two-wheelers, electric buses, and passenger cars. Regarding green hydrogen development, ICRA projects a measured capacity buildup due to current cost disadvantages compared to conventional grey hydrogen.

The rating firm attributes this tempered growth to favourable monsoon conditions, with early seasonal rains and expectations of above-normal precipitation reducing electricity consumption for cooling purposes and agricultural activities.

“Over the next five years, ICRA expects the electricity demand to achieve a healthy compounded annual growth rate (CAGR) of 6.0-6.5%, higher than the ~5.0% CAGR achieved over the past decade, driven by the demand from rising adoption of electric vehicles (EVs), green hydrogen (GH) and the increase in data centre capacity," Vikram V, Vice President & Co-Group Head - Corporate Ratings, ICRA, said in a statement.

"These three segments are expected to contribute to 20-25% of the incremental demand over the next five-year period from FY2026 to FY2030. The growth in demand for grid capacity is expected to be offset to some extent, by the rising adoption of rooftop solar and off-grid projects, driven by schemes such as the Pradhan Mantri Surya Ghar Yojana.”

While renewable energy capacity increases will satisfy much of the additional power requirements, both central and state authorities are promoting new thermal projects to maintain adequate reserve capacity for future demand. This strategic approach is evident in recent project announcements by public sector companies and private developers, along with long-term power procurement tenders issued by state utilities after a ten-year hiatus.