In Short : Crisil Ratings projects that thermal power’s share in India’s electricity generation capacity will fall below 70% by FY27, driven by rapid growth in renewable energy. Strong policy support, falling clean energy costs, and rising investments in solar, wind, and storage are accelerating diversification of the power mix, reshaping India’s long-term energy landscape.
In Detail : India’s power sector is poised for a significant structural transition, with thermal power’s share in the generation mix expected to decline below 70% by FY27. This shift reflects the accelerating pace of renewable energy additions and a gradual rebalancing of the country’s energy portfolio toward cleaner and more sustainable sources.
Thermal power, primarily coal-based, has historically dominated India’s electricity generation due to its reliability and ability to provide base-load power. However, sustained capacity additions in solar and wind energy, combined with supportive government policies, are steadily reducing the relative dominance of thermal generation in the overall capacity mix.
The rapid expansion of renewable energy capacity is being driven by competitive tariffs, improved technology, and strong investor interest. Solar and wind projects are increasingly cost-effective compared to new thermal capacity, making them attractive options for meeting incremental power demand while aligning with climate and sustainability objectives.
Policy initiatives have played a critical role in this transition, with long-term renewable targets, production-linked incentives, and facilitative regulatory frameworks encouraging large-scale clean energy deployment. These measures have created visibility for developers and lenders, supporting consistent growth in renewable installations across the country.
Despite the declining share, thermal power will continue to play a crucial role in ensuring grid stability and meeting peak demand, especially as renewable energy remains intermittent. Existing thermal assets are expected to focus on flexible operations, improved efficiency, and lower emissions to complement the growing share of renewables.
The increasing penetration of renewable energy is also driving investments in supporting infrastructure such as transmission networks, energy storage systems, and grid management technologies. These additions are essential to integrate variable renewable power smoothly and maintain reliability as the energy mix evolves.
From a financial perspective, the changing generation mix is influencing investment patterns and risk assessment in the power sector. While renewable projects benefit from long-term visibility and stable cash flows, thermal assets face greater scrutiny around utilisation levels, environmental compliance, and long-term viability.
Power demand growth in India remains strong, supported by urbanisation, industrial expansion, and rising electrification across sectors. This growing demand provides room for both renewable and thermal generation, even as the relative share of thermal capacity declines in the overall mix.
Overall, the expected fall of thermal power’s share below 70% by FY27 signals a decisive step in India’s energy transition. The evolving power mix highlights a balanced approach that combines rapid renewable growth with the continued, though gradually reduced, role of thermal power in ensuring energy security, affordability, and grid stability.
