When Union Minister of Power Manohar Lal Khattar announced that India would adopt a new temperature-setting rule for air conditioners (ACs) to minimise electricity use during peak hours, critics took to social media to pan the decision. Memes and jokes mocking the proposal began circulating on various platforms, suggesting that the government was overstepping by trying to control bedroom and car temperatures.
Khattar had on June 10 stated that the government plans to set AC temperatures between 20°C and 28°C at hotels, homes and cars to improve energy efficiency of cooling appliances and combat climate change. The announcement was part of several initiatives aimed at reducing the peak power demand and achieving India’s ambitious net-zero target by 2070 under the Paris Agreement. At present, the bulk of the country’s electricity demand is primarily met by coal, a major source of carbon emissions.
Last summer, India experienced a record peak electricity demand of approximately 250 GW. This summer’s demand is on the lower side, peaking at 241 GW on June 5, despite a projection of 270 GW by the Central Electricity Authority.
A technical report of the Grid Controller of India Limited (earlier POSOCO 2025) evaluated the capability of the country's power system to maintain a reliable electricity supply and warned that power shortages will start by 2026 and the gap will keep widening in business as usual scenarios.
The widening of power shortages will occur during evening peak hours when solar generation declines. The report underlined the need for intervention on the demand side of power consumption to meet the shortfall. It also pointed out that ACs are going to be the single largest driving factor behind the rise in power demand.
According to a working paper titled “India Can Avert Power Shortages And Cut Consumer Bills With Stronger AC Efficiency Standards,” between 2019 and 2024 alone, room ACs added an estimated 30–35 GW to peak demand. Room ACs could contribute 120 GW to peak demand by 2030 and 180 GW by 2035—nearly 30% of the total, the report said. The paper was prepared by The India Energy & Climate Center (IECC) at UC Berkeley's Goldman School of Public Policy.
According to the government, every 1°C drop in temperature setting saves 6% energy usage. There are already 10 crore ACs in use, and every year, another 1.5 crore new ACs are added. The current contribution of ACs to peak electricity demand is around 15%. Moreover, there is a projection of a sharp rise in peak demand contribution up to 30% in the next few decades as around 13-15 crore additional ACs will be added to households.
It rang alarm bells as it could trigger power shortages in the next couple of years. The government’s announcement is meant to manage electricity demand by restricting its overuse.
As per the government officials' explanation, the new temperatures setting in the range of 20-28°C may save up to 3 GW of peak electricity demand, enough to power tier-3 cities. The power thus saved can address the peak demand of as many as four Varanasi-like cities.
Shalu Agrawal, Director of Programmes at the Council on Energy, Environment and Water (CEEW), said the move promotes reliable, affordable power while nudging consumers toward healthier, energy-efficient cooling habits. “While people rightly need cooling, ACs are often run at sub-optimal temperatures, leading to wasteful energy use, higher bills, and potential health risks,” Agrawal said.
A 2020 CEEW survey found that nearly 60% of Indian AC users set their units at 23°C or lower. “Even a modest shift from 18°C to 20°C can cut AC energy use by 12%. If just 30% of new buyers (~5 million) adopt this change, it could save 1.4 billion units of electricity annually — enough to power 10–14 million homes monthly,” Agrawal added.
If India improves its ACs efficiency substantially, energy consumption will be reduced to nearly 120 terawatt-hours by 2035, which is comparable to the energy output of over 60 gigawatts (GW) of solar photovoltaic (PV) capacity, say market estimates. The moot question though is whether the industry and consumers are ready for it.
Different studies show that improving the efficiency of ACs can be a win-win proposition for both the industry and consumers. The IECC study challenges the notion that increasing the efficiency of ACs will make them less affordable. Global data, as well as India’s data of AC consumers, reveals that the price of higher efficient ACs consistently decreases while the efficiency of ACs doubles in the same period. Experts explain that the lower cost of ACs with higher efficiency is due to the economy of scale, enhanced manufacturing process, and competitive market dynamics.
Data from Japan shows that between 1990 and 2015, the price of ACs reduced by 80%, while in the same period, ACs efficiency doubled, from 2.5 to 6.1 on the energy efficiency index. In Korea, too, energy efficiency increased to more than double, while the price declined by 60% after inflation was adjusted.
Similarly, between 2004 and 2023, room AC efficiency improved by 60% in India, and prices were nearly halved. However, India’s AC efficiency has not increased compared to Japan and Korea, which bolsters the idea that higher efficiency does not lead to increased costs.
Moreover, the price of lesser efficient ACs compared to the efficient ACs is not much different. The IECC analysis shows that the average market price of 5-star ACs (highly efficient) is almost equal to that of 4-star and a little above that of 3-star. The median retail price of 3-star ACs last year was `36,990, whereas the 4-star median price was `43,490, followed by the 5-star price of `43,990.
A market analysis shows that investing in 5-star ACs (1 ton) yields an upfront median incremental price of `5,970 compared to 1-star ACs. However, the higher-efficiency AC consumes 377 kWh less per year, resulting in annual electricity bill savings of `3,360. This implies a payback period of under two years.
India uses the Indian seasonal energy-efficiency ratio (ISEER) metric to measure AC efficiency. But its pace of growth is slow. For instance, India’s 1-start rated efficiency increased from 2.7 to 3.5 in the past 10 years. In the same period, 5-star energy efficiency increased from 3.5 to 5 on the energy index.
Over the last decade, the Minimum Energy Performance Standards (MEPS) (1-star level) have improved at an average rate of 2–3% per year—far slower than the pace of technology development or global best practices. Currently, AC ownership in India’s urban region is around 10%, and it is at the bottom of AC consumers compared to China and other developed countries. China achieved 100% AC households by 2008, which increased efficiency and lowered prices. This gave Chinese firms an edge over advanced countries.
India appears to be on the same development curve. If it pushes for a higher efficiency target with its own domestic supply chain, new market opportunities will open in Africa and South America, as demand for cheaper technology is quite high in these countries, which have climates similar to India.