India can avert power shortages and cut consumer bills with stronger AC efficiency standards

Nikit Abhyankar*, Jose Dominguez, Nihar Shah, Neelima Jain, Amol Phadke

* Corresponding author – email

India is experiencing a rapid surge in electricity demand driven by the widespread adoption of room air conditioners (ACs), propelled by rising incomes, urbanization, and increasingly severe heat waves.

We estimate that between 2025 and 2035, India will add an additional 130-150 million new room ACs, and without targeted interventions, room ACs alone could contribute over 180 GW to India’s peak load by 2035, straining the power system and necessitating costly investments in new capacity.

This paper evaluates the potential of accelerating room AC efficiency improvements to address this challenge. We propose an aggressive revision of Minimum Energy Performance Standards (MEPS)—raising the 1-star label to ISEER 5.0 by 2027 (equivalent to today’s 5-star level), ISEER 6.3 by 2030 (on-par with the most efficient ACs currently sold in India by leading domestic and multinational manufacturers), and ISEER 7.4 by 2035 (on-par with the most efficient AC currently sold globally).

Our analysis shows that this strategy could reduce peak demand by over 60 GW by 2035, avoid ₹7.5 trillion in generation and grid investments, and deliver up to ₹2.2 trillion in net consumer savings. Drawing on empirical data from India and global markets, we find that super-efficient ACs are already widely available and cost-effective. Strengthening standards, combined with targeted programs, can transform India into a global leader in sustainable and affordable cooling while avoiding looming power shortages and generating massive consumer benefits.

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The Challenge:
Looming Power Shortages
      • India’s electricity demand is growing faster than anticipated, driven by strong economic growth and rapid adoption of room air conditioners (ACs). India adds 10–15 million new ACs annually, with another 130–150 million expected over the next decade. Between 2019 and 2024 alone, room ACs added an estimated 30–35 GW to peak demand.
     
      • Without policy intervention, room ACs could contribute 120 GW to the peak demand by 2030 and 180 GW by 2035 —nearly 30% of the total.
     
      • Even with all under-construction generation and storage projects online, power shortages are expected as early as 2026.
The Solution:
Strengthen Room AC Efficiency Standards
    • Experience from India and around the world shows that Minimum Energy Performance Standards (MEPS)—when paired with comparative star labels—are among the most effective tools for driving appliance efficiency.
 
    • To unlock their full potential, it is critical to strengthen the 1-star MEPS level, rather than only raising the efficiency of higher-tier labels. If MEPS updates remain too weak or too infrequent, the market may drift toward low-efficiency products—undermining the effectiveness of the labeling program as a whole.
 
    • Equally important is the need for a long-term MEPS roadmap—spanning 8 to 10 years—to provide manufacturers with investment clarity and supply chain certainty.

Figure 1. India’s Room Air Conditioner Units and the recommended MEPS (1-Star) trajectory. Each plotted point represents a variable speed AC unit offered for sale in India in 2024, with colors denoting manufacturers and the Y-axis reflecting AC efficiency in ISEER. Efficiency level for each unit is taken from its label as reported on the BEE website.

The Market is Ready for an Ambitious MEPS Revision
(1-star level)

India’s AC market has matured significantly, with a wide range of high-efficiency models already available. An ambitious MEPS trajectory is not only feasible but necessary to accelerate market transformation and ensure long-term energy security.

    • 2027: Set 1-star at ISEER 5.0  – equivalent to the 5-star level today. 600+ AC models (20% of the models offered in the market) already exceed this level.
    • 2030: Set 1-star at ISEER 6.3  – on par with the most efficient AC sold in India today. Leading domestic and international manufacturers (e.g., Godrej, Voltas, Blue Star, Hitachi, Daikin etc.) offer such super-efficient models at competitive prices, signalling supply chain readiness. 
    • 2033: Set 1-star at ISEER 7.4 (on par with the most efficient AC available globally). This will need several supporting measures such as bulk procurement programs for ultra-efficient ACs, revising test procedures to account for dehumidification etc. 

 

This roadmap is fully aligned with India’s G20 commitment to double energy efficiency improvements.

Massive Grid and Consumer Benefits

Figure 2. Projected national peak electricity demand due to ACs in the Business-As-Usual (BAU) case and the Accelerated Efficiency Improvement case, the recommended trajectory for MEPS revision.

          • Avoid 10 GW of peak demand by 2028, 23 GW by 2030 and 64 GW by 2035 → averts power shortages and saves ₹750,000 crore ($85 billion) in avoided power infrastructure investments.
         
          • Net electricity use by 118 TWh/year by 2035 → equivalent to output from 60 GW of solar power plants.
         
          • Net consumer savings of ₹66,000–225,000 crore ($7–26 billion), even after accounting for the incremental cost of efficient ACs
Efficiency Is Affordable

Figure 3. Room AC efficiency index (black) and room AC consumer price index (red) in Japan (1990-2015).

Between 1995 and 2010, AC efficiency nearly doubled, while inflation-adjusted AC prices reduced by 80%

Figure 3. Room AC efficiency (blue, green) and room AC wholesale price index (grey) in India (2006-2023)

Between 2007 and 2023, room AC efficiency improved by 60%, while inflation adjusted AC prices nearly halved.

Note: Efficiency metric uses EER prior to 2016, and ISEER after 2016.



Evidence from India and international markets shows that tightening efficiency standards does not raise AC prices. In fact, historical data reveal that:
        • AC prices often decline even as MEPS become more stringent
        • Costs are primarily driven by economies of scale, brand positioning, competitive pressure, and supply chains.
Supporting Measures
        • Expand bulk procurement (e.g., EESL) and targeted consumer incentives to drive down costs and increase market share of ultra-efficient models.

        • A mix of fiscal tools—including tiered production-linked incentives, targeted GST reductions, and duties on inefficient components—can accelerate market transformation towards efficient ACs.
 
The Cost of Inaction

Weak or delayed MEPS revisions risk locking India into decades of inefficient cooling technologies, worsening shortages and driving costly grid expansion.

Strengthening MEPS is not only a powerful energy savings strategy—it is also a crucial reliability tool and a necessary step toward India becoming a global leader in affordable, sustainable cooling.

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