The year 2024 has been seminal for the power sector with the country meeting an unprecedented peak demand of 250 GW in a year. Besides, India added around 30 GW of installed capacity in the last 12 months, three-fourths of which is renewable energy (RE).

.

To begin with, India added around 30 GW of installed capacity in the last 12 months, three-fourth of which accounts for renewable energy (RE). SBI CAPS in a report said the peak demand recorded in May 2024 occurred in Q1FY25 rather than Q2, which has happened only thrice since FY07.

Infrastructure, thus, becomes the keyword as analysts note the growing share of air conditioning in power consumption amid a rising trend of extended heatwaves, which in turn will put more pressure on transmission grids. Moreover, the International Energy Agency (IEA) expects India’s power demand to grow at 4 per cent annually till 2050.

Anujesh Dwivedi, Partner at Deloitte India, aptly sums up that the reform push on Discoms through the Revamped Distribution Sector Scheme (RDSS), additional borrowing scheme, prudential lending norms, LPS rules and corporate governance guidelines have begun to show signs of improvement and is reflected in the lower ACS-ARR gap and AT&C losses.

Policy push

With 2025 poised to witness policy push for better handling of finances, the Centre has has reiterated that a robust power sector rests on a vibrant discom ecosystem. Other key measures include installation of smart meters.

“Debt sustainability of discoms is the biggest challenge that the sector faces today. Outstanding debt of discoms stood at ₹7.14 lakh crore as of March 2023 and is likely to increase in 2024, as discoms continue to grapple with ACS-ARR gap,” Dwivedi added.

Key developments to watch our for, according to Dwivedi, include initiation of listing process for State power utilities and the growing acceptance of private sector participation in discoms.

The pace of developing transmission infrastructure for evacuating power also needs to catch up.

Infra checklist

Of the 1,14,687 circuit km of (ckm) transmission lines and 776 GVA (Gigavolt-Ampere) substations to be added between April 2022-March 2027, about 28 per cent and 20 per cent, respectively, have been commissioned as of October 2024, SBI CAPS said in a November 2024 report.

“Achieving the remainder by March 2027 would entail doubling of annual addition pace for both – a formidable task given only half such projects have even entered construction phase,” it added.

Supply chain constraints in setting up thermal power plants (TPPs) can also threaten India’s grid balancing efforts in short term. The government aims to set up an additional 80-GW TPP by FY32, but apart from State-run BHEL, India does not have any major producer of equipment, which can delay commissioning of TPPs to meet India’s baseload power needs.

Slowdown in the sector in the last couple of years has disrupted the domestic vendor ecosystem which will likely impact timely completion of projects, BHEL said in its FY24 annual report.

Global scale

Naveen Khandelwal, CEO, BrightNight India, a global RE player, opined that 2025 could see continued pressure on technology access and infrastructure development for countries like India. On policy side, the focus will be on enhancing federal support, fostering international collaboration and setting clear regulations to scale up hybrid and storage technologies.

Volatility in global supply chains, especially with the rising costs of key materials and equipment needed for RE projects, will be another challenge to navigate in 2025, said Hero Future Energies Global CEO Srivatsan Iyer.

Even as India is moving at a significant pace in adding renewables, States are shying away from signing power purchase agreements (PPAs) and power sale agreements (PSAs). This will also be a key monitorable for 2025.

ICRA Co-Group Head (Corporate Ratings) Vikram V opined that considering the renewable purchase obligation (RPO) trajectory is set to increase from 29.91 per cent in FY25 to 43.33 per cent in FY30, State discoms must increase their procurement through signing of new PPAs/PSAs to meet this target.

Related Topics