Govt to add 50 GW of RE capacity in FY26 lowering share of thermal power: Report

According to Crisil Ratings, the plant load factors (PLFs) of existing thermal power plants will see a decrease, and will remain healthy at over 65 percent by FY26, down from 69 percent last year.

The government plans to add 50 gigawatts (GW) of renewable energy (RE) capacity by March 2026, which is expected to lower the share of thermal power in India’s electricity generation. The plant load factors (PLFs) of existing thermal power plants will see a slight decrease, and will remain healthy at over 65 percent by FY26, down from 69 percent last year, Crisil Ratings have reported.

The share of coal-based thermal power rose to 73 percent in FY24, up from around 69 percent in FY20, mainly because electricity demand grew by about 7 percent between FY21 and FY24. In contrast, the growth of renewable energy and other sources like nuclear and hydropower was just 3 percent during this time.

Crisil Ratings’ Senior Director, Manish Gupta, stated that for the first time, the growth in renewable energy generation is expected to exceed overall power demand growth, with RE growing at 20 percent compared to 5-6 percent for total demand in FY25 and FY26. This is due to a strong government effort to increase RE capacity significantly in the next two years.

Although the PLFs for thermal power plants will slightly decrease, they will still be over 65 percent by FY26. This is because thermal power is crucial for meeting nearly half of the increasing annual power demand in the short to medium term. Additionally, thermal power is essential for providing a steady supply of electricity, especially as renewable sources can be inconsistent and lack effective storage solutions.

Crisil Ratings Director Ankit Hakhu noted that the impact of lower PLFs on thermal power companies will be minimal. These companies have reduced their debt by 25 percent from FY21 to FY24 and maintain healthy cash flows. Support from government initiatives for the power sector will also help. Debt levels are expected to remain stable, with limited new capital spending needed for these plants.