India's Electrification Surge: Power Demand to Soar by 2030

India's power demand is projected to reach 335 GW by FY30, driven by aggressive electrification efforts. UBS Research anticipates 780 GW capacity need, highlighting a growth of 10% annually. Renewable energy will dominate new additions, but thermal power remains crucial for grid stability amidst emerging challenges in the solar sector.

India's peak power demand is on a trajectory to significantly increase, hitting 335 gigawatts (GW) by the fiscal year 2030. A report by UBS Research suggests a total power generation capacity requirement of 780 GW by that time, indicating a robust annual growth rate of 10%, surpassing the 6% GDP growth observed between FY15 and FY25.

The conventional correlation between GDP and power demand is undergoing a shift. Historically, the peak power demand grew at 0.85 times the rate of real GDP growth. However, this is expected to rise to nearly 0.92 times with extensive electrification across industries and households.

In the upcoming years, an additional 305 GW of power generation capacity is anticipated, tripling the capacity added between FY20 and FY25. While renewables like solar and wind are expected to contribute significantly, UBS points out the necessity of thermal power for grid stability when renewables falter. This outlook calls for substantial investments in power generation, with private sector investment in renewables rising as long as economic conditions are favorable, while the government focuses on thermal energy expansion.

The solar manufacturing sector, however, faces obstacles in meeting its potential. UBS estimates indicate that only around 60% of the announced solar cell capacity will become operational due to capital and technology constraints. Despite this, the sector's financial outlook remains positive, with projections of a 30% compounded annual growth rate in profits between FY25 and FY30. Companies within the research coverage are expected to demonstrate a revenue growth of 34% and earnings growth of 46% over FY25 to FY28.

(With inputs from agencies.)