The Central Electricity Regulatory Commission has introduced new tariff norms for FY25-29 to ensure stability by maintaining regulated returns for existing power plants. India Ratings and Research (Ind-Ra) foresees a neutral outlook for the power sector, with thermal plant load factors expected to rise to around 70% in FY25, attributed to increased power demand, enhanced domestic coal production, slower capacity additions, and reliance on coal-based generation until ample storage capacity is developed for renewable energy transition.
Ind-Ra's Associate Director, Bhanu Patni, emphasized the ongoing demand-supply imbalance in the power market, driving up thermal plant load factors and merchant tariffs. Despite the ramp-up in solar capacity additions due to reduced module prices and an annual growth rate of over 15GW for renewable capacity, the sector still lacks robust storage solutions for consistent power supply.
The power sector has witnessed debt improvement as a result of reduced working capital needs and enhanced capital structures for major players. Ind-Ra projects sustained high merchant market prices in FY25 due to persistent demand and sluggish thermal capacity expansion, although it anticipates an acceleration in thermal capacity additions in the following years. Furthermore, the agency expects renewable capacity addition to average 15-18 GW annually over FY25-26, supported by declining equipment costs and favorable policy environment, pending the development of storage options for uninterrupted power supply.
The progression of renewable capacity additions remains contingent upon regulatory decisions regarding import duties on cells and modules, support for domestic manufacturing, and promoting local equipment sourcing. As the power sector continues to evolve, maintaining a balanced mix of conventional and renewable sources while resolving storage challenges will be vital for meeting India's growing energy demands efficiently.