The capacity utilisation of thermal power plants will increase by a percentage point to 69 per cent in 2024-25, led by the growth in electricity demand and limited thermal capacity addition, says rating agency ICRA

Spot power tariffs in the day-ahead market (DAM) of the Indian Energy Exchange have remained notably high at Rs 5.4 per unit in Year-To-Date (YTD) Fiscal Year 2024, attributed to substantial demand growth. Projections suggest that these spot tariffs will persist at elevated levels, ranging between Rs 4.5-5.0/unit in the near term, surpassing the long-term average of Rs 3.0-3.5/unit. Despite the modest coal stock levels at around 12 days for domestic power plants as of December 2023, below the normative requirement, this figure remains consistent with the previous year.

ICRA highlights the potential need for a significant increase in thermal capacity, estimating up to 70 GW, if annual demand growth remains strong at 7.5 per cent until 2030. Coal continues to play a dominant role in meeting base load power demand, although its overall share in the energy generation mix is expected to decline from 73 percent in FY2023 to approximately 58-60 per cent in FY2030. This projection considers the addition of 200 GW of renewable capacity between FY2024 and FY2030.

ICRA maintains a ‘Stable’ outlook for the thermal power segment, supported by a healthy improvement in the thermal plant load factor (PLF) and reduced dues from state distribution utilities (discoms) following the implementation of the Late Payment Surcharge (LPS) scheme since August 2022. Girishkumar Kadam, Senior Vice President & Group Head – Corporate Ratings at ICRA, notes that the current under-construction thermal capacity of about 30 GW, mainly in the Central and state-owned generation segment, is expected to be commissioned over the next two to four years. However, he emphasizes the necessity for additional capacity beyond this pipeline if annual electricity demand growth continues to exceed 6.0 percent until 2030, even after factoring in renewable capacity additions.