The generation segment is undergoing a significant transformation, with renewable energy rapidly overtaking thermal power in the installed capacity mix. The renewable energy installations continue to grow at a rapid pace, with 18 GW added in 2023-24, compared to just 7,348 MW of thermal capacity. This shift is expected to gain further momentum as the government intensifies efforts to meet its climate change targets.
As energy demand continues to grow at 8-10 per cent annually, there is a need to tap every possible source of power to meet energy needs. Coal-based power plants will continue to play a vital role in meeting baseload and peak demand, especially during this transitional phase. Notably, the government has prioritised increasing domestic coal production and has called for the addition of 60-80 GW of thermal capacity to ensure energy security and reduce dependence on imports.
An overview of the country’s power generation segment…
Segment growth and performance
As of July 2024, the total installed capacity in the power sector stood at 448 GW. Fuel-wise, coal- and lignite-based power had the highest share at 49 per cent, followed by solar at 19 per cent. Large hydro contributed 10 per cent of the capacity, followed by wind at 10 per cent, gas at 6 per cent, bioenergy and nuclear at 2 per cent each, and small hydro at 1 per cent. The share of renewables reached nearly 43 per cent, with the inclusion of large hydro (46,928.17 MW).
The installed capacity grew at a CAGR of 4.4 per cent between 2018-19 and 2023-24. While conventional power capacity has grown at a CAGR of 1.5 per cent during the past five years, renewable energy has grown at a CAGR of 9.1 per cent. In absolute terms, around 25,698 MW of net capacity was added in 2023-24, of which 5,754 MW was based on thermal power sources, 18,484 MW on renewables (including small hydro), 60 MW on large hydro and 1,400 MW on nuclear. The conventional capacity addition has considerably slowed down in recent years, with generators and lenders moving away from coal/gas-based projects due to environmental concerns. Meanwhile, renewable energy capacity addition has continued to grow due to increased tendering activity, reduced execution risks and cost-reflective tariffs.
Meanwhile, the total recorded generation (including renewable energy sources) stood at 1,739 BUs in 2023-24, recording an increase of 7 per cent compared to 1,624 BUs in 2022-23. The renewable energy generation during 2023-24 (including large hydro) was around 360 BUs. In terms of fuel sources, thermal power accounted for the largest share of the generation mix at 76 per cent, followed by renewable sources at 21 per cent and nuclear power at approximately 3 per cent. The total generation grew at a CAGR of 4.79 per cent between 2018-19 and 2023-24. Thermal generation grew at 4.3 per cent and renewable energy generation at 12.24 per cent during this period. During 2024-25 (as of July 2024), the total generation has been recorded at 556 BUs, registering an increase of 10 per cent compared to 504 BUs in 2022-23.
On the operational performance front, the thermal plant load factor (PLF) improved to 67.55 per cent in July 2024 from 63.64 per cent in July 2023. During July 2024, the PLF of gas-based plants was 14.43 per cent. This could be attributed to healthy electricity demand growth leading to improved capacity utilisation.
Recent developments
In the Union Budget 2024-25, the finance minister announced measures to enhance energy security, including collaboration with the private sector for developing Bharat small modular reactors and Bharat small reactors. The Energy Transition Pathways policy will be released to address employment, growth and environmental sustainability challenges, while a new policy will promote pumped storage projects for electricity. A joint venture (JV) between NTPC Limited and Bharat Heavy Electricals Limited (BHEL) will set up an 800 MW plant, using advanced ultra-supercritical technology.
To meet the power demand during monsoon months, the Ministry of Power (MoP) extended its coal import advisory for domestic coal-based power plants in July 2024. Initially issued in October 2023, the advisory required 6 per cent blending of imported coal, which was later reduced to 4 per cent and extended until October 15, 2024. In April 2024, the MoP also directed gas-based power plants to maximise generation from May to June 2024 to meet the summer demand. Additionally, the MoP urged power generators to offer surplus power in the open market. A high-level Central Electricity Authority (CEA) committee will oversee compliance.
Apart from this, India will invite private firms to invest approximately $26 billion in its nuclear energy space to boost electricity production from non-carbon-emitting sources. This marks the first time that the country is seeking private investment in nuclear power, a sector that currently contributes less than 2 per cent to India’s total electricity generation. This investment is aimed at helping India achieve its goal of having 50 per cent of its installed electric generation capacity come from non-fossil fuels by 2030, up from the current 42 per cent.
Update on emission norms
In line with the Ministry of Environment, Forest and Climate Change’s emission norms issued in December 2015, thermal power plant (TPP) developers are taking measures to reduce SOx, NOx and particulate matter (PM) emissions. According to the MoP, flue gas desulphurisation (FGD) for SOx control is being installed in 537 units across coal-based TPPs as of August 2024. So far, FGD systems have been commissioned in 39 units with a capacity of 19,430 MW. Contracts have been awarded for 238 units, with a cumulative capacity of 105,200 MW. Further, 139 units are in the tendering process, with a capacity of 42,847 MW. Additionally, electrostatic precipitators (ESPs) are widely used in TPPs to control PM emissions by electrically charging ash particles in flue gas. ESPs are highly efficient, capturing over 99.99 per cent of particles ranging from 0.01 to 100 micrometres. As per the CEA, 57 units (19,794 MW) have upgraded their ESPs, 12 units (1,690 MW) have ESP upgrades planned by December 2024 and six units (2,005 MW) expect PM compliance post FGD installation.
Besides this, biomass co-firing is a method used by TPPs to reduce emissions. The MoP’s policy on biomass utilisation for power generation through co-firing in coal-based power plants mandates 5-7 per cent co-firing of biomass, primarily agro residue, with coal, after assessing its technical feasibility. As of June 2024, 0.81 million tonnes of cumulative biomass has been co-fired across India, resulting in a reduction of about 0.97 mt of CO2 emissions from TPPs. Another technique being deployed to reduce emissions is carbon capture and storage, by which CO2 is captured from power generation and securely stored underground to prevent atmospheric release. On this front, NTPC has commissioned a pilot carbon capture project with 20 tonnes per day capacity at the Vindhyachal thermal
power station.
Project update
Recently, several new contacts have been awarded in the thermal power segment. In August 2024, Adani Power and Mahan Energen signed a Rs 110 billion contract with BHEL to develop three supercritical thermal power projects (2×800 MW each) in Kawai, Rajasthan, and Mahan, Madhya Pradesh. During the same month, the Damodar Valley Corporation awarded a contract to BHEL to set up a 2×800 MW supercritical TPP in Koderma, Jharkhand.
In July 2024, GE Power India Limited received a supply order from NTPC GE Power Services Private Limited, with a contract value of Rs 3.48 billion. The contract focuses on the renovation and modernisation of steam turbines at NTPC’s Vindhyachal thermal power station units 1-3 (3×210 MW). In the same month, the central government gave in-principle consent to TUECO, a JV of UJVN Limited and THDC India Limited, to set up a coal-based TPP in Uttarakhand. The CEA had previously recommended the supply of coal to Uttarakhand for the purpose of generating 1,320 MW of thermal power under the Scheme for Harnessing and Allocating Koyla (Coal) Transparently in India (SHAKTI) policy.
In June 2024, Adani Power Limited awarded an order to BHEL for setting up a 2×800 MW TPP at Raipur, Chhattisgarh. The project is estimated to cost Rs 35 billion. In the same month, Mirzapur Thermal Energy UP Private Limited awarded a contract to BHEL for a 2×800 MW TPP at Mirzapur Phase I, Uttar Pradesh. The cost of the project is estimated to be over Rs 35 billion.
In January 2024, NLC India Limited awarded an engineering, procurement and construction (EPC) contract to BHEL for NLC’s 2,400 MW (3×800 MW) Talabira TPP in Odisha, featuring ultra-supercritical technology. The power is tied up with Tamil Nadu, Odisha, Kerala and Puducherry, with the first unit scheduled for commissioning in 2028-29.
In September 2024, the government accorded approval for Anushakti Vidhyut Nigam Limited (ASHVINI), a JV between Nuclear Power Corporation of India Limited (NPCIL) and NTPC Limited, to build, own and operate nuclear power plants in India under the Atomic Energy Act. Additionally, the government approved the transfer of the Mahi Banswara Rajasthan Atomic Power Project (MBRAPP), comprising 4×700 MWe reactors based on pressurised heavy-water reactor technology, from NPCIL to the JV company ASHVINI. The government also granted exemptions allowing NPCIL to invest over Rs 5 billion and NTPC to invest over Rs 50 billion in a single JV or subsidiary. In addition to the MBRAPP, ASHVINI shall also pursue other nuclear power projects in different parts of the country.
Issues and challenges
The generation sector faces major challenges, particularly in maintaining a stable coal supply. Seasonal rainfall disrupts coal production and transportation, leading to critically low stocks, risking plant availability and potential blackouts. The sector’s heavy reliance on coal makes any supply disruption impactful. Another challenge is the issue of stranded or stressed assets, where significant investments in TPPs remain underutilised, causing financial burdens. An estimated 41 GW of coal-based capacity is currently stressed due to factors such as the absence of long-term power purchase agreements (PPAs), inadequate coal linkages and the inability of promoters to secure the necessary funding for project completion. Additionally, tighter environmental regulations are on the horizon, which, while necessary, may increase operational costs and complicate long-term planning. Moreover, the growing presence of renewable energy requires TPPs to operate more flexibly, straining equipment and increasing maintenance costs. Furthermore, coal-based plants frequently encounter fuel shortages. Despite a steady rise in coal production to meet growing demands, logistical issues often result in coal shortages at power plants, especially during periods of peak demand.
Moreover, outstanding dues from discoms continue to weigh on the growth of the generation segment. As of September 12, 2024, the outstanding amount from discoms to independent power producers stood at Rs 863.19 billion (as per data from the PRAAPTI [payment ratification and analysis in power procurement for bringing transparency in invoicing of generators] portal). While the central government has taken adequate measures to address the current crisis, a sustainable solution needs to be explored to resolve these issues and prevent the recurrence of such crises in the future.
Outlook
The CEA’s National Electricity Plan (NEP) released in 2023 projects 900 GW of total power capacity by 2031-32. Of this, roughly 40 per cent is expected to come from solar power, which is higher than the 29 per cent share from coal and lignite power. Wind power is expected to make up 13 per cent of the capacity, while small hydro, hydropower and pumped storage will contribute only 11 per cent in total. The required funding for generation capacity addition is estimated to be Rs 14,541.88 billion for 2022-27 and Rs 19,064.06 billion for 2027-32. As per the NEP projections, energy storage capacity of 16.13 GW/82.37 GWh, with pumped storage plant (PSP)-based storage of 7.45 GW capacity and 47.65 GWh storage and battery energy storage system (BESS)-based storage of 8.68 GW/34.72 GWh is required by 2026-27. The storage capacity requirement increases to 73.93 GW (26.69 GW PSP and 47.24 GW BESS), with storage of 411.4 GWh (175.18 GWh from PSP and 236.22 GWh from BESS) by 2031-32.
According to the NEP document, the projected all-India peak electricity demand and electrical energy requirement is 277.2 GW and 1,907.8 BUs for 2026-27 and 366.4 GW and 2,473.8 BUs for 2031-32 as per the 20th Electric Power Survey demand projections. The domestic coal requirement has been estimated to be 866.4 mt for 2026-27 and 1,025.8 mt for 2031-32 and an estimated
requirement of 28.9 mt of coal imports for the plants designed to run on imported coal.
Overall, the outlook for the thermal power segment remains stable due to improvements in thermal PLF and healthy demand growth, enhancing the likelihood of signing new PPAs. While the renewable energy segment will continue to be the primary driver of generation capacity additions, the thermal segment is expected to see new project announcements, driven by the robust demand growth.
Akanksha Chandrakar