Renewable energy to reduce coal's share in power generation to 67% by FY26

12 Aug 2024

Crisil Ratings said the share of coal-based power in India’s total electricity generation is projected to decline by more than 500 basis points to about 67% by next fiscal year, from 73% in fiscal 2024. Despite this shift, the plant load factor (PLF) for thermal plants will remain healthy, estimated at over 65% by fiscal 2026, compared to 69% last fiscal year.

"The share of thermal is expected to fall over 500 bps to about 67% by fiscal 2026. We are witnessing a significant increase in renewable energy generation growth at 20%, which will outpace the overall power demand growth of 5-6% during fiscal 2025 and 2026," said Manish Gupta, Senior Director, CRISIL Ratings.

Thermal power remains critical to meeting about half of the annual incremental electricity demand in the near to medium term, maintaining a high PLF due to limited capacity additions. This is essential to meet baseload requirements given the intermittent nature of renewable energy capacities and the absence of sustainable storage solutions.

CRISIL's study of approximately 33 GW of private coal-based capacities indicates that despite a marginal fall in PLF, thermal power entities are financially stable. About half of these capacities benefit from a tariff model that ensures full recovery of fixed costs, thus providing financial stability.