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India's Thermal Power Share to Fall Below 70% as Renewables Surge

A new CRISIL Ratings report projects thermal power's share in India's generation mix will drop below 70% in the next fiscal year. This decline is driven by renewable energy capacity additions of 75-85 gigawatts, which will meet most of the country's incremental power demand. Consequently, the plant load factor for thermal plants is expected to fall to 64-66%. However, thermal power remains crucial for grid stability due to the intermittent nature of renewables and limited energy storage.

Key Points: India's Thermal Power Share Dips as Renewables Grow: Report

  • Thermal share to fall below 70% by FY26
  • RE to grow 18-20% CAGR
  • Thermal plant load factors to decline
  • Thermal capex revival to increase leverage
2 min read

India's thermal power share to fall below 70 pc as renewables surge: Report

CRISIL report forecasts thermal power's share in India's energy mix to fall below 70% by FY26, driven by rapid renewable capacity additions.

"Despite its declining share, thermal power remains crucial as grid absorption of RE is constrained... - Manish Gupta, Crisil Ratings"

New Delhi, Jan 19

Thermal power's share in India's generation mix is set to drop below 70 per cent next fiscal amid a surge in renewable energy, a report said on Monday.

The report from Crisil Ratings said the thermal share is expected to slip to 72 per cent in FY26 from about 75 per cent in fiscal 2025.

Renewable generation is poised to log a compound annual growth rate of 18-20 per cent over this fiscal and next, driven by 75-85 gigawatt of capacity additions, amid a robust pipeline of utility projects and a ramp-up in commercial and industrial and rooftop additions.

The surge in renewable power generation will result in RE meeting most of the incremental power demand in the country, the report said.

Plant load factors of thermal plants is set to fall to 64-66 per cent this fiscal and next from 69 per cent last fiscal, the report said.

More power purchase agreements are being signed improving cash‑flow visibility and driving a revival in thermal capex, which will raise leverage for thermal producers over the next three to four years but keep credit profiles stable due to healthy cash flows and controlled debt, the report said.

Power demand growth is seen easing to 1-2 per cent this fiscal because of an early monsoon and cool summer, before rebounding to 4-6 per cent next fiscal on a low base, the agency forecasted.

The compound annual growth rate (CAGR) will be under 4 per cent over this fiscal and next, compared to 5.6 per cent over the last five fiscals.

"Despite its declining share, thermal power remains crucial as grid absorption of RE is constrained by the intermittent nature of RE and the nascent adoption of energy storage solutions," said Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings.

Buoyed by healthy cash flows, Independent Power Producers (IPPs) in the agency's portfolio saw leverage decline but revival in capex will peak leverage around 3 times by fiscal 2029, according to Dushyant Chauhan, Associate Director, Crisil Ratings.

- IANS

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Reader Comments

P
Priya S
Good news for our air quality! Cities like Delhi will breathe easier if we can reduce coal dependency. But we must ensure this transition is just for the lakhs of workers in the thermal power sector. Skill development programs are crucial.
R
Rohit P
While the surge in renewables is welcome, the report shows thermal is still the backbone at ~70%. We can't put all our eggs in the renewable basket until storage tech is affordable and widespread. Monsoon months with low solar generation are a real concern.
S
Sarah B
Interesting data. The 18-20% CAGR for renewables is impressive, but the easing power demand growth (1-2%) this fiscal due to weather shows how vulnerable our consumption patterns are. Long-term planning needs to account for climate variability.
M
Manish T
The revival in thermal capex is a smart move. We need a balanced approach. Let renewables grow, but also modernize our existing coal plants to make them more efficient and less polluting. Energy independence means using all resources wisely.
K
Kavya N
As a consumer, I just want reliable 24/7 power at a reasonable cost. Whether it comes from the sun, wind, or coal, stability is key. Hope the discoms can manage this transition without passing on huge cost increases to us. 🤞
D

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