India's power generating capacity to reach 780GW by FY30 with annual growth of 10%: UBS Report
UBS Research estimates that India will require a total power generation capacity of 780GW by FY30, implying an annual growth of 10 per cent, faster than the 6 per cent average GDP growth recorded between FY15 and FY25. The link between GDP and power demand is also shifting. Historically, peak power demand grew at 0.85 times the rate of real GDP growth, but with increased electrification across industries and households, this is expected to rise to nearly 0.92 times.
The next five years are projected to see the addition of 305GW of power generation capacity, three times the capacity added between FY20 and FY25. While most of this will come from renewable sources like solar and wind, UBS Research notes that thermal power will still be essential to ensure grid stability when renewables are not generating.
The forecast comes with a call for a fresh wave of investments in power generation to meet this growing need. Earlier, India's power generation was dominated by thermal plants owned mainly by the government and state-owned enterprises. But the renewable energy boom has seen more private players step in.
"As long as the economics are favourable, the private sector will likely continue to invest in renewable energy generation, whereas the government will continue to invest in thermal energy," the report stated.
Thermal plants are expected to contribute around 40 per cent of new power generation over the medium term, with the government targeting the addition of about 80GW of thermal capacity by FY32.
At the same time, the report stated that the solar manufacturing sector faces challenges. Given the heavy capital and technology requirements, UBS Research estimates that only about 60 per cent of the announced solar cell capacity will be commissioned.
The industry's financial outlook appears strong, the research projects the overall profit pool for the power sector to grow at a 30 per cent compounded annual rate (CAGR) over FY25 to FY30, with companies in its coverage universe expected to deliver revenue growth of 34 per cent and earnings growth of 46 per cent over FY25 to FY28.
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