Thermal power’s contribution to India’s energy mix is expected to fall below 70% in the upcoming fiscal year due to a surge in renewable energy, as per a report by Crisil Ratings. The report forecasts a decrease in thermal power’s share to 72% in FY26 from around 75% in fiscal 2025.
Renewable energy generation is anticipated to grow at a compound annual rate of 18–20% in the current fiscal year and the next, driven by the addition of 75–85 gigawatts of capacity. This growth is supported by a robust pipeline of utility projects and an increase in commercial, industrial, and rooftop installations.
The rise in renewable power generation is expected to meet most of the incremental power demand in the country, according to the report. Plant load factors of thermal plants are projected to decline to 64–66% in the current and next fiscal years from 69% in the previous fiscal year.
More power purchase agreements are being signed, enhancing cash-flow visibility and stimulating a resurgence in thermal capital expenditure. This trend is likely to increase leverage for thermal producers over the next three to four years but maintain stable credit profiles due to strong cash flows and managed debt levels.
Power demand growth is predicted to slow to 1–2% in the current fiscal year due to early monsoons and a mild summer, before rebounding to 4–6% in the next fiscal year based on a low base, as forecasted by the agency. The compound annual growth rate is expected to be below 4% over the current and next fiscal years, compared to 5.6% over the last five fiscal years.
“Despite its diminishing share, thermal power remains vital as the grid’s absorption of renewable energy is limited by its intermittent nature and the gradual adoption of energy storage solutions,” stated Manish Gupta, Deputy Chief Ratings Officer at Crisil Ratings. Independent Power Producers (IPPs) in the agency’s portfolio have witnessed a decline in leverage due to healthy cash flows, but a resurgence in capital expenditure is expected to peak leverage around 3 times by fiscal 2029, according to Dushyant Chauhan, Associate Director at Crisil Ratings.
