For the first time, the Thermal share in power generation is set to drop below 70%, decreasing from ~75% in fiscal 2025 to 72% due to slower power demand growth and rising renewable energy (RE) generation. This will result in plant load factors (PLFs) for thermal power plants falling to 64-66% from 69%. Despite a deceleration in power demand to 1-2% this fiscal, a rebound to 4-6% is expected next fiscal supported by renewable capacity expansions projected at a CAGR of 18-20%. As a result of increasing power purchase agreements (PPAs), cash flow visibility is improving, leading to a revival of capital expenditure (capex) in the thermal sector. Notably, approximately 85% of the operational capacity held by.
While Some PLF Moderation
Independent power producers (IPPs) is now secured through PPAs, which ensures more stable revenue. These agreements include a two-part tariff structure designed to recover capacity charges fully and insulate certain cash flows from PLF volatility. While some PLF moderation may affect cash flows, the financial stability of IPPs is largely maintained due to healthy cash flows, with a forecasted peak in leverage at ~3.0 times by fiscal 2029 before normalizing. Overall, despite challenges, thermal power is anticipated to remain vital as a stabilizing source amid the fluctuating nature of renewables India’s power generation landscape is undergoing a major structural shift as.
The share of thermal power in the country’s electricity mix is projected to fall below 70 percent in the next fiscal year, according to a recent report by CRISIL Ratings, a development that marks a significant milestone in India’s long-term energy transition journey and reflects the accelerating pace of renewable energy adoption across the country. For decades, coal-based thermal power plants have formed the backbone of India’s electricity supply, contributing more than three-fourths of total generation, but rising environmental concerns, government policy support for clean energy, falling costs of solar and wind power, and strong investor interest are now reshaping.
Coal Based Generation But Rather
The power sector in a decisive manner, making India one of the fastest-growing renewable energy markets globally The CRISIL report highlights that the declining share of thermal power does not necessarily indicate an absolute fall in coal-based generation, but rather a faster growth rate in renewable and non-fossil fuel capacity additions, which is gradually reducing the dominance of thermal sources in the overall generation mix. India’s installed renewable energy capacity, which includes solar, wind, small hydro and biomass, has crossed 180 GW, and with large-scale solar parks, wind-solar hybrid projects, and battery storage systems being commissioned.
Rapidly, the contribution of clean energy to daily power supply is rising steadily. This transition is closely aligned with India’s national commitment to achieve 500 GW of non-fossil fuel capacity by 2030 and to meet its net-zero carbon emission target by 2070, goals that are driving both public and private sector investments into green power infrastructure From a policy perspective, the government has introduced multiple enabling mechanisms such as production-linked incentive schemes for solar manufacturing, viability gap funding for offshore wind projects, and renewable purchase obligations for distribution companies, all of which are strengthening.
Commercial Consumers To Procure
The renewable ecosystem and improving the financial viability of clean energy projects. At the same time, the introduction of green open access rules and the expansion of interstate transmission corridors are making it easier for industries and commercial consumers to procure renewable power directly, further boosting demand and reducing reliance on coal-based electricity. For a deeper understanding of India’s renewable capacity expansion, Despite the declining share, thermal power will continue to play a critical role in ensuring grid stability and meeting base load demand, especially during peak consumption periods and in regions where renewable.
Penetration remains limited. CRISIL notes that coal-fired plants will remain essential for balancing the intermittency of solar and wind generation until large-scale energy storage solutions become commercially viable and widely deployed. This makes the current phase a period of transition rather than replacement, where thermal and renewable sources coexist, with the latter growing at a faster pace and gradually reducing the former’s relative contribution Another important dimension highlighted in the CRISIL assessment is the improving plant load factor of thermal power stations after years of underutilisation, driven by rising electricity demand from manufacturing.
High Demand Regions However
Infrastructure projects, data centres and electric mobility. Even as their share declines, thermal plants are expected to operate more efficiently, with better fuel management, improved emission control systems and selective capacity additions in high-demand regions. However, stricter environmental norms related to sulphur dioxide emissions, water usage and ash handling are increasing compliance costs for coal-based plants, making renewable energy comparatively more attractive for new investments. Detailed regulatory updates on thermal emission standards can be accessed from the Central Electricity Authority through From an investment standpoint.
The falling share of thermal power signals a major rebalancing of capital flows within the energy sector. Banks, infrastructure funds and global climate-focused investors are increasingly prioritising solar, wind and green hydrogen projects over conventional coal-based (India) assets, reflecting both policy signals and long-term risk assessments related to carbon pricing and stranded assets. This shift is also creating new opportunities in allied segments such as energy storage, smart grids, electric vehicle charging infrastructure and green financing, making In the broader economic context, the reduction in thermal power share is expected to improve India’s.
Implications For Public Health And Environmental Quality
Energy security by reducing dependence on imported coal and lowering exposure to global fuel price volatility, while simultaneously helping the country meet its climate commitments under the Paris Agreement. It also has positive implications for public health and environmental quality, as lower coal usage translates into reduced air pollution and greenhouse gas emissions over the medium to long term. International agencies such as the International Energy Agency have consistently highlighted India’s role as a key driver of global renewable energy growth, and their latest outlooks can be reviewed through for a global perspective on the transition underway.
The projection that thermal power’s share will fall below 70 percent in the next fiscal year represents not just a statistical change, but a structural transformation in India’s power generation mix, driven by policy support, technological progress and market forces that are steadily (India) pushing the country towards a cleaner, more sustainable energy future. While coal will remain a vital part of the system for years to come, the momentum clearly lies with renewables, making this a defining phase in India’s journey from a coal-dominated power sector to a diversified, low-carbon energy economy.
Q1. What does CRISIL predict about thermal power share?
CRISIL predicts thermal power share will fall below 70% next fiscal.
Q2. Why is thermal power share declining?
Due to rapid growth in renewable energy capacity.
Q3. Will coal power shut down completely?
No, thermal will still support base load and grid stability.
Q4. What is driving renewable growth?
Government policies, lower costs, and private investment.
Q5. What is India’s renewable target by 2030?
India targets 500 GW of non-fossil capacity by 2030.
