Hydropower generation across key Asian markets fell by about 13 average gigawatts year-on-year in June 2026, according to S&P Global Commodity Insights.
India and Vietnam accounted for more than 80 per cent of the regional decline, as drought conditions linked to El Niño reduced hydro availability.
The shortfall pushed power systems to rely more heavily on coal and LNG to maintain grid reliability during periods of high demand.
The report warned that hydropower output could remain below normal across several Asian markets through the third quarter of 2026 if El Niño conditions persist.
Hydropower generation across key Asian markets fell by about 13 average gigawatts year-on-year in June 2026, with India and Vietnam accounting for more than 80 per cent of the decline, according to a new report.
The shortfall is forcing power systems across the region to rely more heavily on coal and liquefied natural gas, or LNG, to maintain grid reliability, with weather conditions linked to El Niño expected to keep hydropower output under pressure through the third quarter of 2026.
The report, El Niño Removes 13 aGW of Asian Hydropower Flexibility, released on July 3, 2026 by energy market analyst S&P Global Commodity Insights, found that combined hydropower generation across Japan, South Korea, India, Bangladesh, Vietnam, the Philippines and Malaysia declined by about 13 average gigawatts compared with June 2025.
India recorded the largest fall at 6.3 average gigawatts, followed by Vietnam at 4.6 average gigawatts. Together, the two countries contributed more than 80 per cent of the regional reduction, suggesting a broad weather-driven trend rather than isolated local events.
El Niño is a naturally occurring climate pattern marked by unusually warm sea surface temperatures in the central and eastern equatorial Pacific Ocean. It disrupts atmospheric circulation and rainfall patterns worldwide, often triggering droughts in parts of Asia and Australia, while bringing heavier rainfall to parts of the Americas.
The current event is strengthening rapidly, with the World Meteorological Organization warning of a rapid development between July and September 2026. This could intensify heatwaves, suppress monsoon rainfall in parts of Asia, reduce reservoir inflows and hydropower generation, and increase the risk of drought and wildfires.
Forecasts indicate that El Niño is likely to persist through the end of 2026, raising concerns over agriculture, water availability and energy security across the region.
“Widespread drought conditions in June 2026 forced Asian nations to burn more coal and gas as flexible hydropower vanished. This will be a critical test for Asia’s energy transition ambitions as nations try to balance climate commitments against immediate grid reliability needs,” Andre Lambine, lead Asia Pacific short-term power and renewables research, Cambridge Energy Research Associates, S&P Global, said in a statement.
Asia lost the equivalent of 13 average gigawatts of flexible electricity in a single month in June 2026, he added. “Unlike solar or wind, you cannot simply build your way out of a drought,” Lambine said.
Hydropower plays a crucial role in balancing electricity grids because it can respond rapidly to fluctuations in demand and renewable energy generation. With lower hydro availability, dispatchable thermal generation is increasingly being used to maintain system reliability.
India saw electricity demand increase by 24.3 average gigawatts year-on-year in June. This coincided with a 6.3 average gigawatt decline in hydropower generation and a 0.8 average gigawatt reduction in gas-fired generation.
Coal-fired generation rose by 20.7 average gigawatts to bridge most of the gap, while solar and wind generation together increased by 9.4 average gigawatts. In Vietnam, electricity demand rose by 6.1 average gigawatts, while hydropower generation fell by 4.6 average gigawatts. Coal-fired output increased by 7.1 average gigawatts, supported by higher gas, solar and wind generation.
According to the report, the increased dependence on thermal generation is expected to support additional LNG demand across the region as utilities seek flexible sources of electricity during periods of peak demand.
Current El Niño-adjusted outlooks indicate that hydropower utilisation rates are likely to remain below normal across several Asian markets, including India, Bangladesh, Vietnam and the Philippines, through the third quarter of 2026.
If dry conditions persist, the June decline could mark the beginning of a broader seasonal trend, extending the need for coal- and LNG-fired generation to maintain supply security.
“Hydropower generation could remain below normal if El Niño conditions persist through the summer months. Under this scenario, we could see a broader seasonal trend, extending the need for additional thermal generation and increasing reliance on flexible fuel sources, such as LNG, to maintain supply security,” Lambine said.
The report also noted that, as commodity flows through the Strait of Hormuz normalise following the Iran conflict, weather is likely to become the biggest driver of Asian power markets during the summer.
Most Asian utilities have already secured fuel supplies for the coming months, meaning the impact of geopolitical disruptions is expected to be delayed. Stronger effects are likely to emerge in the fourth quarter, the report said.