Will India’s power supply be able to keep up with demand?

In renewables alone, solar will remain a primary contributor.

India's electricity demand is seen to increase by 8% this year, up from 7.6% in 2023 driven by a strong economic and industrial growth despite the easing of demand surge caused by the extreme heatwave from May to July, Fitch Ratings said.

It also expects thermal power plants to run at about 68% capacity in 2024, down from a peak of 72% in the first seven months of the year,

In terms of supply, Fitch sees the addition of renewable energy capacity to gain significant momentum over the next two to three years. This follows an increase in new project auctions, which rose to 70 gigawatts (GW) in the fiscal year ended March 2024 from 20 GW the previous fiscal year. 

“Fitch anticipates that the economic environment - characterised by stable interest rates and lower equipment prices - will continue to support capacity additions in the next few years,” it said

“We believe solar power will remain the primary contributor to renewable energy growth, whilst government initiatives aimed at enhancing India's wind capacity are also likely to foster substantial growth in the sector,” it added.

India's thermal power capacity is projected to expand at a measured pace over the next three-to-five years, despite the push towards renewable energy. 

Fitch sees an annual addition of 5GW-6GW in thermal capacity in the medium term, compared with an average of about 3GW per annum between 2020 and 2023. 

“Thermal power is likely to continue playing a pivotal role in India's power sector in the medium term, at least until advancements in power storage technology become more widespread,” Fitch said.