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Power Sector Strong Despite Demand Fears, Led by Renewables: Report

A report by Anand Rathi Institutional Equities asserts that concerns over slowing power demand and oversupply are misplaced, as underlying structural trends remain robust. It highlights that peak demand and consumption in non-grid segments like captive power and data centres are growing strongly. The future capacity addition will be overwhelmingly led by renewable energy, with 377 GW projected versus only 38 GW of thermal power between FY26-32. While acknowledging near-term grid reliability needs for thermal power and ongoing transmission challenges, the report concludes strong fundamentals and regulatory support will limit long-term value destruction.

Key Points: Power Sector Structurally Strong, Growth Driven by Renewables

  • Peak demand to hit 458GW by 2032
  • Renewables to add ~377GW vs 38GW thermal
  • Transmission capacity expanding rapidly
  • Solar module demand exceeds supply
2 min read

Power sector remains structurally strong despite concerns on slowing demand and oversupply: Report

Report dismisses power demand slowdown fears, highlights strong peak demand and massive renewable capacity addition projected till 2032.

Power sector remains structurally strong despite concerns on slowing demand and oversupply: Report
"Peak demand and non-grid consumption are rising faster - Anand Rathi Report"

New Delhi, March 17

Concerns surrounding slowing power demand and potential oversupply in the sector are largely misplaced, with underlying structural trends continuing to support long-term growth, according to a report by Anand Rathi Institutional Equities.

The report stated that headline concerns fail to capture the broader changes underway in the power ecosystem.

It noted that while "power demand plateaued at around 5 per cent p.a.," actual consumption trends remain strong, driven by rising peak demand and rapid growth in non-grid segments.

"Peak demand and non-grid consumption are rising faster," the report said, highlighting the expansion of captive power, data centres and rooftop solar.

It added that peak demand is projected to reach "around 458GW by 2032, a 9 per cent CAGR sustaining capacity addition requirements."

On the supply side, the report clarified that thermal power, which currently accounts for "76 per cent generation," will continue to play a key role in ensuring grid reliability in the near term.

However, the future growth trajectory will be led by renewable energy, with "~377GW between FY26-32 versus only ~38GW of thermal," indicating that incremental capacity addition will be largely driven by clean energy sources.

Addressing infrastructure concerns, the report noted that evacuation challenges persist but are being actively addressed.

"Transmission capacity is expanding rapidly," it said, with substation capacity expected to rise from "1,338k MVA (FY25) to 2,412k MVA (FY32)" and transmission lines from "494k ckm to 648k ckm," supported by reforms to improve coordination.

The report also dismissed fears of oversupply in solar PV modules, stating that "module demand exceeds headline additions," implying a "~110GW annual nameplate requirement."

It pointed to supply-side constraints such as "cell/ wafer bottlenecks and technology shifts" that limit effective supply and are likely to drive consolidation rather than oversupply.

Despite concerns over valuations and comparisons with the telecom sector cycle, the report maintained that strong demand fundamentals and regulatory support would limit long-term value destruction, even if consolidation occurs within the renewable energy space.

It outlined "while renewables may see consolidation similar to telecom, structural demand and regulatory support limit value destruction".

- ANI

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Reader Comments

S
Sarah B
As someone working in the renewable energy space, the numbers on future capacity addition are encouraging. ~377GW of renewables vs only ~38GW thermal is the right direction. My only concern is the speed of transmission line expansion. Evacuation is still a major hurdle in many states.
P
Priya S
Good to see a balanced view. We cannot just switch off thermal plants overnight. They are needed for base load and grid stability, especially during peak summer months. The transition has to be managed properly. Jai Hind!
R
Rohit P
The report is optimistic, but I have a respectful criticism. It glosses over the financial health of DISCOMs. If the distribution companies are bleeding money, how will they pay for all this new power and infrastructure? That's the elephant in the room.
K
Karthik V
Peak demand of 458GW by 2032! That's massive. This means continuous investment and job creation in the sector. Hope the manufacturing for solar modules and other equipment also scales up within India. Aatmanirbhar Bharat in energy is crucial.
M
Michael C
Interesting analysis. The comparison to the telecom sector's consolidation is apt. There was a shakeout, but the sector emerged stronger and services improved dramatically. If renewables follow a similar path with regulatory oversight, it could be positive for consumers in the long run.

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