NewKerala.com

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

Crisil Ratings forecasts thermal power's share in India's electricity generation will drop below 70% in the next financial year for the first time. This decline is driven by slower power demand growth and a sharp 18-20% CAGR increase in renewable energy generation. Despite the shift, thermal power remains crucial for grid stability due to the intermittent nature of renewables. A revival in thermal power capital expenditure is underway, supported by a rise in long-term power purchase agreements.

Key Points: Thermal Power Share in India to Fall Below 70%: Crisil

  • Thermal share to fall below 70%
  • RE generation growing at 18-20% CAGR
  • Thermal plant load factors to moderate
  • Revival in thermal power capex
  • Long-term PPAs providing revenue visibility
3 min read

Thermal power's share in India's electricity generation to fall below 70% next fiscal: Crisil Ratings

Crisil Ratings projects thermal power's share in India's electricity generation will drop below 70% next fiscal, driven by strong renewable energy growth.

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

New Delhi, January 19

The share of thermal power in India's electricity generation is expected to fall below 70% in the next financial year for the first time, driven by slower growth in power demand and a sharp rise in renewable energy generation, according to a report by Crisil Ratings.

Crisil Ratings estimated that thermal power's share will decline to about 72% in the current fiscal from nearly 75% in FY25, before slipping further below the 70% mark next year. As a result, plant load factors (PLFs) of thermal power plants are projected to moderate to 64-66% in the current and next fiscal, compared with 69% in FY25.

Growth in power demand is expected to decelerate to 1-2% this fiscal because of an early monsoon and a relatively cool summer, but rebound to 4-6% next fiscal on a low base.

Despite this, the compound annual growth rate (CAGR) will be less than 4% over this fiscal and next, weaker than the 5.6% over the last five fiscals. In contrast, RE generation is poised to log a CAGR of 18-20% over this fiscal and next, driven by 75-85 gigawatt (GW) of RE capacity additions amid a robust pipeline of utility projects and a ramp-up in commercial and industrial and rooftop additions. This will result in RE meeting most of the incremental power demand in the country, it highlighted.

The increase in power purchase agreement (PPA) signings, which provide better cash-flow visibility and a healthy outlook for long-term base-load power demand are driving a revival in capital expenditure (capex) in thermal power.

Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, said, "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. This has sparked a revival in capex in the thermal power sector. Furthermore, distribution utilities have begun entering into long-term thermal PPAs to ensure round-the-clock power supply."

"Thus, almost 85% of the 60 GW operational capacity held by independent power producers (IPPs) is now tied up (vs 79% at the end of last fiscal) through PPAs, providing improved revenue visibility and reducing volatility associated with the merchant market," he added.

Despite the declining share of thermal power, Crisil Ratings noted that coal- and gas-based generation will continue to play a critical role in ensuring grid stability, given the intermittent nature of renewables and the early stage of energy storage adoption. This has led to a revival in thermal power capital expenditure, supported by a rise in long-term power purchase agreements (PPAs) with distribution utilities.

- ANI

Share this article:

Reader Comments

P
Priya S
Good news, but we must be cautious. As the report says, thermal is still crucial for grid stability. My father works in a power plant and they are worried about job security with this transition. The government needs a plan for reskilling workers in the coal sector.
M
Michael C
Interesting analysis. The revival in thermal capex despite declining share shows how complex the energy transition is. It's not just about building solar parks, but ensuring the entire grid can handle the intermittency. Long-term PPAs make sense for stability.
S
Shreya B
Finally some positive data! The air quality in our cities is terrible, and coal plants are a big contributor. Hope this trend continues and we accelerate rooftop solar. The focus on C&I and rooftop additions mentioned in the article is key for distributed generation.
R
Rahul R
The report is optimistic, but what about the state DISCOMs? They are still financially weak. Signing long-term PPAs is good, but will they be able to pay on time? Unless the distribution sector is reformed, any energy transition will face hurdles.
K
Kavya N
As someone from a village that just got 24/7 power a few years ago, this reliability is everything. I appreciate the balanced view—renewables are the future, but we still need thermal for baseload, especially during monsoons when solar output is low. A pragmatic approach is best.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50