India’s Power Output Growth Slows in September 2025 as Industrial Activity Cools

Introduction

India saw a decline in growth generation in September 2025 due to a series of industrial activities and a longer-than-expected monsoon period which means a lower equilibrium level of demand. Based on data analyzed by Grid India, power generation increased 3.2% year on year down from 4% in August, and reports the first monthly growth decline in the past three months.

The power sector and industrial activities in India are closely linked. Because half of the power generated in the country goes to industries, a decline in industrial activities directly lowers power generation.

Explanation

1.Industrial Slowdown and Monsoon Impact

The tempering of the manufacturing momentum in India during September 2025 was a key factor for the slower increase in electricity generation. A downward revision to the Purchasing Managers’ Index (PMI) for the month suggested subdued industrial growth, which directly impacted energy-intensive industries including steel, cement and automobiles. At the same time, prolonged periods of rainfall in many parts of the country also reduced demand from air-conditioning and refrigeration loads, which led to less consumption from the residential and commercial sectors.Together, these factors contributed to the moderation in power output.

2. Decline in Coal-Based Power and Supply

Coal continues to account for about 75% of India’s total power generation. However, coal-fired output fell in September compared to the previous month. Coal India Limited, the country’s largest coal producer, reported that its production declined by about 4%, while supply fell by 1.1%. The dip in production and offtake coincided with the onset of heavy rains, which typically affect coal mining and transport operations.

Industry analysts noted that although coal inventories at thermal power plants have decreased slightly, they remain adequate to meet short-term requirements. Nevertheless, continued monitoring of fuel security and compliance with Central Electricity Authority (CEA) stocking norms will be crucial in the months ahead.

3. Renewables and Hydro Drive Growth

While thermal generation slowed, renewable and hydropower output continued to show robust growth. Supported by record capacity additions, India added nearly 30 GW of new solar and wind installations in the first eight months of 2025. As a result, renewable generation rose by about 16% year-on-year in September, while hydropower output increased by 7.4%.

In total, India generated 156.52 billion kilowatt hours of electricity during September 2025. The rise in renewables aligns with India’s long-term goal of achieving 500 GW of non-fossil fuel capacity by 2030, gradually reducing dependence on coal-based energy and supporting its broader decarbonisation commitments.

4. Policy and Market Implications

The September moderation also carries several regulatory and commercial implications:

• For thermal power producers, lower demand could impact plant load factors and the recovery of fixed costs under long-term Power Purchase Agreements (PPAs).
• For DISCOMs, subdued industrial demand may affect revenue projections, requiring revisions in tariff filings and procurement strategies.
• For renewable developers, the steady growth presents both opportunities and challenges — particularly in ensuring grid stability, managing curtailment risks, and complying with Renewable Purchase Obligations (RPOs).

The government and regulators may also need to strengthen mechanisms for grid flexibility, storage integration, and short-term market balancing as India’s generation mix diversifies further.

Conclusion

The weaker power demand due to extended monsoon periods and a decline in lower anticipated industrial demand are reflected in the September 2025 figures. The consumption of power will drop while the generation will continue to increase due to renewables and hydropower.

This is a significant development in the country’s energy dynamic which changed more than it has in the past. The changed dynamic of the power sector calls for a balance in the generation of power to be invested in, so the country can have a reliable growth power sector.

India’s long-term growth trajectory is unchanged and remains strong.