India Ratings and Research (Ind-Ra) in its latest report has said that coal-based power will remain critical for base load management in the medium term, though renewable energy (RE) capacity additions remain strong. Furthermore, thermal capacity additions are expected to pick up pace in FY26, considering the capacity under construction and demand expectation by FY32. Ind-Ra also maintains stable rating outlook for thermal power projects for the rest of FY26 based on healthy Plant Load Factor (PLF), dependency on thermal, high revenue visibility through Power Purchase Agreements (PPAs) and adequate internal liquidity.
Vishal Kotecha, Director & Head - Infrastructure & Project Finance, Ind-Ra said ‘we expect thermal power to remain critical for base load management in the medium term, though renewable capacity additions remain strong. Land acquisition, connectivity and adequate evacuation/transmission infrastructure remain key monitorables for the sector. The consistent functioning of the Late Payment Surcharge Rules 2022 supports the counterparty risk, even among entities selling directly selling to discoms.’ He noted that base load is the minimum demand observed over a day. This load is generally lowest during the night when solar isn't generating. Hence, non-solar capacity, especially thermal, is required to manage the base load, he explained.
He further said during FY25 and April-July FY26, PPAs for over 17GW of new capacity were in various stages of approvals from state electricity regulatory commission, such as tender and power purchase signing, indicating a strong demand for thermal power purchase. Of the 17 GW, power purchase agreement has been signed for 2 GW. He said thermal capacities contributed 71.5 per cent to the total power generated in 1QFY26 with a share of 49.9 per cent of the installed capacity. Ind-Ra expects thermal PLF to be healthy at 69-70 per cent for FY26 and FY27, also supported by sufficient coal stock.
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