ICRA projected a robust thermal plant load factor (PLF) or capacity utilization of 70% for FY2025, driven by a 6% growth in power demand, according to a statement released on Thursday. The outlook for the thermal power segment is deemed “Stable” by ICRA, buoyed by improved PLF and strong demand growth, which enhances prospects for new power purchase agreements (PPAs).
The implementation of the Late Payment Surcharge (LPS) scheme has notably bolstered payment discipline from state distribution utilities (discoms) to power generation companies since August 2022. However, ICRA maintained a “Negative” outlook for the power distribution segment due to limited tariff hikes and ongoing operational losses.
ICRA forecasts the all-India thermal PLF to edge up marginally to 70% in FY2025 from 69% in FY2024, supported by rising electricity demand and constrained thermal capacity expansions. Projected full-year electricity demand growth for FY2025 stands at 6%, slightly below the expected GDP growth rate of 6.8% for the fiscal year, albeit higher than the average growth rate observed over the past decade.
The sustained growth in electricity demand in recent years necessitates a reevaluation of thermal capacity expansions, prompting government initiatives to incentivize new thermal power projects, including increased participation from the private sector. Vikram V, Vice President & Co-Group Head of Corporate Ratings at ICRA, highlighted expectations for a capacity addition of 30 GW in FY2025, up from 25 GW in FY2024, with the total installed power generation capacity projected to exceed 470 GW by March 2025.
Specifically, the thermal segment anticipates adding 5.0-5.5 GW in FY2025, while the renewable energy (RE) segment is set to contribute the remaining 25 GW, signaling a balanced expansion strategy in India’s energy sector.
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