ICRA expects India to add about 50 GW of power generation capacity in 2026–27, with renewable energy (RE) expected to account for the overwhelming majority of additions. The thermal segment is likely to contribute around 6 GW.
The rating agency projects power demand to rise by 5.0-5.5% in 2026-27 against a tepid 1% growth in 2025-26 that was affected by weather related disruptions. The demand growth in 2026-27 is likely to be supported by the agricultural and household sectors given the expectation of sub-par rainfall amidst a potential El Nino, along with demand from industries as well as from emerging sources like electric vehicles and data centres.
The all-India thermal plant load factor (PLF) level fell to 65-66% in 2025-26 amid demand moderation and is likely to remain around 65% in 2026-27, given the healthy growth in generation expected from the renewable sources and 6 GW capacity addition likely in the thermal segment.
Commenting on the demand growth outlook, Ankit Jain, Vice President & Co-Group Head – Corporate Ratings, ICRA, said: “The thermal power sector in India is witnessing a revived investment emphasis, even as the renewable capacity continues to expand at a rapid pace. Thermal power acts as a reliable base-load supply, aiding grid stability, amid expectations of power demand growth.”
“While renewables would remain the key driver of power generation capacity addition going forward, the thermal segment has seen an increase in under-construction capacity over the past few quarters, which currently stands at over 45 GW. This is also reflected in the new project announcements by public sector undertakings and private power producers as well as long-term power purchase bids called by state distribution utilities after a long period of limited activity.”
Jain added that amid increasing capacities across various power generation technologies, ability of the thermal power plants to operate flexibly above the technical minimum as well as adopt new models like thermal generation coupled with storage systems to keep PLFs healthy and support the growing power demand, will be closely monitored.
ICRA
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