Will India's Thermal Power Share Drop Below 70% as Renewables Gain Momentum?
Synopsis
As renewable energy sources surge, India's thermal power share is set to fall below 70 percent in the coming fiscal year. A recent report reveals insights into the changing energy landscape, highlighting significant growth in renewable capacity and its implications for thermal energy's role in India's power generation.
Key Takeaways
India's thermal power share is set to fall below 70%.
Renewable energy generation is expected to grow at a CAGR of 18-20%.
Thermal plant load factors will decrease to 64-66%.
Power demand growth is projected to slow to 1-2% this fiscal.
Thermal power remains vital for grid stability.
New Delhi, Jan 19 (NationPress) The contribution of thermal power to India's energy generation is projected to dip below 70 percent in the upcoming fiscal year, driven by a remarkable rise in renewable energy sources, according to a recent report.
The analysis by Crisil Ratings indicates that the thermal energy share is likely to decline to 72 percent in FY26, down from approximately 75 percent in fiscal 2025.
Renewable energy generation is anticipated to achieve a compound annual growth rate (CAGR) of 18–20 percent over the current and next fiscal years, fueled by the addition of 75–85 gigawatts in capacity, supported by a solid pipeline of utility projects and increased commercial and rooftop installations.
This surge in renewable energy capacity is expected to fulfill the majority of the incremental electricity demand in the nation, the report highlighted.
The plant load factors for thermal power plants are predicted to decrease to 64–66 percent this fiscal year and the next, compared to 69 percent in the previous fiscal year, as stated in the report.
With more power purchase agreements being established, cash-flow visibility is improving, promoting a revival in thermal capital expenditure (capex). This will enhance leverage for thermal producers over the next three to four years, while maintaining stable credit profiles due to strong cash flows and contained debt levels, according to the report.
Power demand growth is projected to slow to 1–2 percent this fiscal year due to an early monsoon and cooler summer, before climbing to 4–6 percent next fiscal year from a low base, as per the agency's forecasts.
The CAGR is expected to be under 4 percent this fiscal and next, compared to 5.6 percent over the last five fiscals.
“Despite the decline in its share, thermal power continues to play a vital role as the grid's ability to absorb renewable energy is limited by the intermittent nature of renewables and the early stages of energy storage adoption,” remarked Manish Gupta, Deputy Chief Ratings Officer at Crisil Ratings.
Thanks to robust cash flows, Independent Power Producers (IPPs) within the agency's portfolio have seen a reduction in leverage. However, a revival in capex is expected to peak leverage at approximately 3 times by fiscal 2029, according to Dushyant Chauhan, Associate Director at Crisil Ratings.
Point of View
This analysis highlights a significant transition in India's energy generation landscape. As renewables continue to grow, the challenges and opportunities for thermal power producers will shape the future of energy in India. Staying attuned to these shifts will be essential for policymakers, investors, and consumers alike.
NationPress
9 May 2026
Frequently Asked Questions
What is the expected thermal power share in FY26?
The thermal power share is expected to decrease to 72 percent in FY26.
What is driving the growth of renewable energy in India?
The growth is driven by significant capacity additions, estimated at 75–85 gigawatts, and a robust pipeline of utility projects.
How will thermal plant load factors be affected?
Thermal plant load factors are projected to decline to 64–66 percent this fiscal year and the next.
What is the predicted power demand growth for this fiscal year?
Power demand growth is expected to ease to 1–2 percent this fiscal year.
Why is thermal power still important despite its declining share?
Thermal power remains crucial due to the intermittent nature of renewable energy and the nascent adoption of energy storage solutions.
