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CRISIL Ratings in its latest report has said that strong addition of renewable energy (RE) capacities will pull down the share of coal-based (thermal) plants in power generation by over 500 basis points (bps) to around 67% by next fiscal (FY26) after rising continuously in the past five through fiscal 2024. It said yet the plant load factor (PLF) of thermal plants will remain healthy because of limited capacity addition.

According to the report, healthy PLFs and moderating cost pressures due to robust domestic coal supply will support operating cash flows, which, along with reduced debt levels, will result in comfortable credit profiles for thermal players. The share of thermal power in overall power generation had increased to 73% in fiscal 2024 from around 69% in fiscal 2020. This was mainly because the growth in demand (at around 7% during fiscals 2021-2024) was being met largely by thermal generation. RE and other sources (nuclear, hydel, biomass) clocked just around 3% compound annual growth rate during this period.

The report stated that the PLFs of existing thermal plants will see a marginal fall but will remain healthy at more than 65% by fiscal 2026 compared with 69% last fiscal. This is because, thermal power is needed to meet almost half of the incremental annual power demand over near to medium term. This, along with limited capacity addition, will lead to continued dependence on the existing thermal capacities. Furthermore, thermal power will remain important for meeting the base load requirements due to the intermittent nature of RE capacity and absence of sustainable storage solutions.