Despite rapid renewable energy (RE) additions, coal-based thermal power will remain essential for base load management in the medium term, according to India Ratings and Research (Ind-Ra). The agency also expects a pickup in thermal capacity additions from FY26, driven by under-construction projects and rising demand through FY32.

Speaking at a webinar, Vishal Kotecha, Director & Head – Infrastructure & Project Finance, Ind-Ra, said, "We expect thermal power to remain critical for base load management in the medium term, though renewable capacity additions remain strong. Land acquisition, connectivity and adequate evacuation/transmission infrastructure remain key monitorables for the sector. The consistent functioning of the Late Payment Surcharge Rules 2022 supports the counterparty risk, even among entities directly selling to discoms."

Explaining the need for thermal capacity, Kotecha said base load is the minimum demand observed over a day, typically during night hours when solar generation is absent. Non-solar capacity, particularly coal-based, remains vital to meet this demand.

Ind-Ra has maintained a stable rating outlook for thermal projects through FY26, supported by healthy plant load factors (PLF), continued dependency on thermal power, long-term revenue visibility through power purchase agreements (PPAs), and adequate liquidity.

During FY25 and April–July FY26, PPAs for over 17 GW of new capacity were under approval, with agreements for 2 GW already signed, indicating strong demand. Thermal power accounted for 71.5 per cent of total generation in 1QFY26, with a PLF expected to remain at 69–70 per cent in FY26–FY27, backed by sufficient coal supply.

On renewables, Divya Charen C, Associate Director, Ind-Ra, highlighted that strong growth continues, with 12.2 GW of solar and wind capacity added in 1QFY26 (compared to 28 GW in FY25). She noted a stable outlook for renewable projects based on robust generation profiles, regular payments from counterparties, and healthy liquidity.

"We expect strong capacity additions in FY26, supported by a large under-construction pipeline. Sustained traction in renewable tenders, particularly hybrid, storage, and round-the-clock projects, will drive growth. Developers are increasingly offering hybrid capacity to industrial and commercial users, providing better cost savings than standalone solar," Charen said.

This shift, she added, reflects the trend of discoms charging lower tariffs during solar hours and higher during non-solar hours, making hybrid solutions more attractive for consumers.

News source: Rediff