India's power demand is poised to grow at a robust pace of 5% to 6% annually over the next 7 to 10 years, according to Elara Capital's Rupesh D Sankhe. This marks a significant acceleration from the 4.5% average growth seen over the past 15 years, driven by rising residential and industrial electrification, and the burgeoning electric vehicle and data centre sectors.
The surge in power demand is attributed to three key factors. Residential electrification is expanding as more households adopt appliances, while industrial sectors are increasingly shifting from fossil fuels to grid power. Additionally, the rise of electric vehicles and data centres is creating new categories of electricity consumption. Current peak demand has reached approximately 270 gigawatts, with expectations for the grid to manage 280–290 gigawatts by FY27.
India's power capacity is set for a massive expansion. The current installed capacity of about 540 gigawatts is projected to grow to 750–800 gigawatts by 2030, and potentially 1,100 gigawatts by 2032–36. This growth will be supported by developments in solar, wind, hydro, nuclear, and coal energy. Notably, 100 gigawatts of capacity is under construction, including 27 gigawatts of coal, 12–15 gigawatts of hydro, and 12 gigawatts of nuclear power.
“Next 7 to 10 years, you can fairly estimate close to 5% to 6% kind of power demand growth.”
Rupesh D Sankhe, Elara Capital
Grid connectivity issues that previously hampered renewable energy uptake are improving, with HVDC transmission line projects advancing. Financially stressed distribution companies, historically a weak link, are now in better shape, with improved liquidity and viable renewable tariffs.
Sankhe highlights several power sector stocks as attractive investments, noting their reasonable valuations. Large-cap stocks like NTPC and Tata Power are well-positioned, while mid-cap NLC India also receives a positive outlook. Coal India is expected to benefit from higher demand and improved auction realizations.
Background
India's power sector is undergoing a transformative period, with significant implications for the economy and investment landscape. The focus on renewable energy and infrastructure development is expected to continue driving growth in the sector.
Looking ahead, the power sector's expansion presents numerous opportunities for investors and stakeholders. The ongoing capacity build-out and improvements in grid infrastructure will be crucial in meeting the rising demand and supporting India's economic growth trajectory.
