Thermal PLFs to remain healthy amid power demand-supply mismatch: Report

New Delhi: India Ratings and Research (Ind-Ra) on Wednesday maintained a neutral outlook for the power sector, noting that thermal PLFs (plant load factor or capacity utilisation) will remain healthy amid demand-supply mismatch in FY'25.

"India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the power sector for FY'25, as it believes the overall plant load factor of thermal power plants would continue to improve and reach closer to 70 percent in FY'25," an Ind-Ra statement said.

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This is attributed to continued higher power demand, a ramp-up in domestic coal production, slower capacity additions and continued dependence on coal-based generation till sufficient storage capacity is built up for energy transition towards renewables, it added.

"Ind-Ra continues to see a demand-supply mismatch in the power market, which would lead to a continued uptick in plant load factors of thermal plants and elevated merchant tariffs," said Bhanu Patni, Associate Director, Corporate Ratings, Ind-Ra.

Patni further stated that while solar capacity addition has picked up pace following a reduction in the module prices and renewable capacity addition is likely to remain at over 15GW annually, effective storage options still need to be developed for the renewable capacities to be able to provide round-the-clock power.

The sector has seen an improvement in debt position backed by a reduction in working capital requirements and an improvement in capital structures of large players, Patni added.

The agency expects merchant market prices to remain high in FY'25 amid continued higher demand and slower thermal capacity addition.

However, Ind-Ra expects the thermal capacity addition to pick up pace over FY'25-26 with the likely commissioning of 6-8 GW each year.

The new draft tariff norms released by the Central Electricity Regulatory Commission for FY'25-29 also ensure stability by keeping the regulated returns of existing power plants.

Ind-Ra expects the annual renewable capacity addition to maintain pace and remain at 15-18 GW over FY'25-26, owing to a significant reduction in equipment prices, continued policy support, availability of liquidity and investment plans of some of the large corporate players in the renewable sector for growth.

However, it stated that the execution timelines of renewable capacity addition would continue to hinge on the regulatory stance towards import duties on cells and modules, support towards domestic cells and modules manufacturing and indigenisation push towards domestic equipment sourcing.

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