The Central Electricity Authority (CEA) has identified the explosive growth of data centers and the strategic push for green hydrogen as the primary drivers of a massive increase in India’s power demand over the coming years.
The CEA highlighted that emerging technologies like rapidly expanding data centers and the new push for green hydrogen production are set to drive a massive surge in India’s power demand. This escalating need for electricity requires substantial capacity addition, innovative supply models, and a significant transition towards reliable, round-the-clock green power to meet the requirements of these energy-intensive sectors.
Growth drivers:
The CEA highlighted that the rapid expansion of digital infrastructure and the national commitment to a green energy transition are creating a massive new electricity load.
Data centers, in particular, are growing exponentially to meet the demands of AI, cloud services, and 5G rollout.
CEA Chairperson Ghanshyam Prasad stressed the scale of the impending surge at a recent industry summit.
“Data centers are expected to grow from 1 GW today to 16 GW in a short period. Green hydrogen, green ammonia, and EVs will also add significant demand,” Prasad said.
This new class of high-demand consumers is unique, as they require power not just in bulk but with unprecedented reliability and cleanliness.
The need for capacity markets:
To address the challenges posed by this surging and specialized demand, particularly the requirement for 24×7 green power, the CEA is looking to introduce reforms, including capacity markets.
A capacity market is a mechanism where generators are paid not just for the electricity they produce, but for having generation capacity available when it’s needed. This ensures system reliability, especially when intermittent renewable energy sources like solar and wind form a large part of the grid.
Prasad emphasized that these new sectors are actively “seeking 24×7 green power, which requires innovative supply models.” The capacity market is viewed as a crucial tool for securing resource adequacy—the ability of the system to meet demand—and driving investment in flexible, firm power resources like battery energy storage systems (BESS) and pumped storage plants (PSP), which can balance the grid.
CEA’s long-term grid reliability plan:
The CEA’s long-term planning, as detailed in reports like the Optimal Generation Capacity Mix for 2029-30, projects total installed capacity to reach 777 GW by the end of the decade, with 62% coming from non-fossil sources. This aggressive target for renewable energy necessitates robust measures for grid stability.
The move towards a capacity market is one such strategic intervention, ensuring that the necessary infrastructure is built and maintained to back up the massive renewable energy additions and reliably serve new, energy-intensive growth areas.
The CEA is focusing on resource adequacy and system flexibility, highlighting that the market design is essential for maintaining grid reliability as the country integrates large-scale variable renewable energy sources.
