NEW DELHI: A renewed push to thermal power seems to have finally ended sluggishness in the sector. While the pace of construction has accelerated for a clutch of units including ultra super critical ones, state-run NTPC and leading private players such as Adani Power, Tata Power have scaled up their thermal portfolios.
The turnaround is significant as it comes after a decade-long phase of relative stagnation in the sector. Several thermal plants, particular gas-fired ones, had got stranded after or in the midst of construction, and many turned insolvent, since the “twin balance sheet problem” (rising NPAs) gripped both the corporate and banking sectors.
Since that crisis, which saw banks saddled with high NPAs and over-leveraged corporations, the RBI did a salvaging act, but the lenders have never really turned upbeat about the sector.
The current reversal of the trend stems from the Union power ministry’s prodding, but the steep rise in power demand too boosted the investors’ confidence. The government has set a target to add nearly 95 gigawatts (GW) of thermal power generation capacity by 2032 to meet the rising power demand.
According to sources, the country is working on several major thermal power projects, including greenfield units and brownfield expansions. One of the key greenfield projects is the Nabinagar Super Thermal Power Project in Bihar, which involves adding three ultra-supercritical units of 800 MW each, totaling 2,400 MW, with an investment of Rs 29,947 crore. Another major project is the Yadadri Thermal Power Plant in Telangana, a 4,000 MW project with five units of 800 MW each, costing around RS 25,099 crore. In Tamil Nadu, the Uppur Thermal Power Project is also under way, with two 800 MW units adding up to 1,600 MW.
For brownfield developments, NTPC is planning to increase its coal-based power capacity by more than 10,000 MW. This will be done by expanding existing plants at locations like Talcher, Darlipali, Lara, Sipat, Singrauli, and Meja.
The state-owned company has charted out plans to add 30 giga watt (GW) of coal-based capacity by the year 2031-32, upwards from its earlier target of 26 GW, a senior executive of the company who did not wish to be identified had told FE.
Tata Power, which has been planning its exit from the coal-based power business, is now re-evaluating its strategy and will look at new thermal projects depending on the opportunities and returns they offer.
“The opportunities should be good and must align with our long-term objective,” the company’s CEO Praveer Sinhatold reporters during the Q4FY25 earnings conference. As per reports, the company is eyeing its first coal power capacity expansion in six years by boosting capacity at a plant in northern India.
Adani Power too sees the demand for thermal power to remain strong and expects merchant power demand to be robust in FY26, with higher demand and lower thermal capacity addition, its chief executive SB Khyalia has said in an investor call recently.
The company plans to increase its thermal capacity to 30.7 GW by FY30 from 17.5 GW in FY25, with addition of 12.5 GW capacity organically, it said in its annual report for FY25. “All new organic additions would be based on ultra-supercritical technology, which will ensure high thermal efficiency and lower carbon emissions,” it said.
“Renewable sources of power are variable and diurnal in nature. On the other hand meeting peak power demand requires firm and predictable sources of generation. Other contributing factors include shorter gestation period of thermal projects and lower capital cost of coal-based plants compared to hydro and nuclear plants,” said Anujesh Dwivedi, partner at Deloitte India.
Variable nature of renewable energy (RE) sources makes it contribute sub-optimally on the supply front, without adequate energy storage solutions in place. Grid limitations for evacuating power from RE-rich areas to other parts of the country without proper transmission infrastructure is also a challenge.
Another reason for Indian companies to invest in new thermal projects is the expected retirement of older thermal plants of around 2 GW by 2030, as they may not be able to meet the requisite environmental norms, as per analysts.
India’s peak power demand reached 250 GW in 2024 and is projected to reach 334 GW by 2029-30, with demand rising especially during summer months. To address the growing peak demand in the long run, the Central Electricity Authority estimates the country to have 777 GW of installed power generation capacity by 2030 out of which 50.5% is expected to come from RE sources and 32% from thermal sources.
While coal based plants shall continue to form a significant portion of the installed capacity mix, its share is expected to fall from the current level of 47% as at the end of 2024-25, to 32% by 2029-30.
India has a per capita consumption of 1395 kWh as of 2024 and is witnessing a growth of 6-8% annually. Most developed countries are about 10 times the per capita consumption of electricity and have a stable or marginally growing demand.
The financing landscape for thermal power projects is also undergoing a significant shift. “The financing appetite for thermal projects is evolving, not retreating. While global capital is increasingly chasing green assets, India’s unique energy realities have ensured continued interest in well-run, future-ready thermal infrastructure,” said Avantika Gupta, CEO, OPG Power.
State-owned REC Ltd also recently revealed its plans of increasing conventional thermal power projects financing.
Lenders, including non-banking financial institutions and banks, are showing greater selectivity, but not reluctance, especially toward assets that are technically sound, environmentally compliant and viable for the long-term energy goal, Gupta noted.
Source: The Financial Express
