India's power generation and transmission sectors are poised for substantial growth, and as the country enters a phase of capex-driven GDP growth, the power intensity should rise, said Jefferies in its latest September report.
The report added that the power generation and transmission sectors are projected to rise 2.2 times to USD 280 billion between FY24 and FY30 compared to FY17-23.The American firm noted that the power intensity will be essential to sustain the economy's growth, as the GDP is expanding at a rapid pace.
It further added that the power consumption is expected to grow more than 7 per cent annually.
The report anticipated that by FY30, India's total power generation capacity will need to increase from 442 GW in FY24 to 673 GW to avoid power shortages. This expansion will drive further investment in thermal power, which is expected to play a vital role in maintaining grid stability, the report added.
The country's thermal power plants, which currently operate at around 65-70 per cent plant load factor (PLF), will play a critical role in meeting this demand.
The average annual PLF for thermal power plants is anticipated to surpass the peak levels observed in FY08 by FY28, with thermal utilisation rates already hitting 74 per cent in FY25 to date.
However, it also highlighted that the peak power deficits are becoming more frequent, driven by years of underinvestment in the sector.
To prevent regular power shortages, the focus will be on accelerating capacity additions and boosting investment in power transmission and distribution (T&D) equipment, Jefferies said.
It stated that the capacity additions are projected to rise significantly, especially in thermal power where the annual addition rate is set to increase to 17 GW from the current 2-5 GW.
In line with traditional energy sources, the capacity of renewable energy will also grow rapidly.
The annual capacity addition for renewables is expected to increase 3.5 times between FY24 and FY27 compared to FY10-20, it estimated.
India has set the target to achieve 450 GW of renewable energy target by 2030.The power transmission sector is also set for significant growth, with the bid pipeline increasing seven-fold over the past three years.
In February 2021, the pipeline was valued at less than Rs 150 billion, but as of now, Rs 1 trillion in projects are up for bidding.
According to the report, this rapid expansion will be driven by the government's focus on expanding renewable energy capacity, alongside the growing needs for storage, green hydrogen, data centres, and electric vehicle infrastructure.