India's Electrical Future: EVs, Green Hydrogen, and Data Centers Driving Growth
Key Ideas
- India's electricity demand is set to grow at a CAGR of 6.0–6.5% over the next five years, driven by the adoption of EVs, green hydrogen production, and data center capacities.
- Thermal plant load factor projected to remain steady at 70% in FY2026 with significant renewables expansion, leading to a peak generation capacity of 44 GW.
- While thermal power outlook remains stable, the distribution segment poses challenges with declining spot prices, fragile financial health of discoms, and limited tariff reforms.
- Initiatives like Pradhan Mantri Surya Ghar Yojana and smart metering aim to stabilize the sector's financials, but substantial reforms are crucial for a meaningful turnaround.
India's electricity demand is forecasted to experience robust growth over the next five years, with a compound annual growth rate (CAGR) of 6.0–6.5%. This expansion is primarily attributed to the rising adoption of electric vehicles (EVs), the scaling up of green hydrogen (GH) production, and the increasing data center capacities. ICRA expects these factors to contribute significantly to the power demand between fiscal years 2026 and 2030. The outlook for thermal power generation remains stable, supported by ongoing projects and government initiatives. However, challenges persist in the distribution segment, with declining spot prices and fragile financial health of distribution companies (discoms). Despite some improvements in book losses, discoms' debt levels have surged. ICRA maintains a negative outlook on the distribution sector due to persistent cash gaps and limited tariff reforms. To address these issues, initiatives like the Pradhan Mantri Surya Ghar Yojana and advancements in smart metering are highlighted as potential stabilizers, though substantial structural reforms are deemed necessary for a significant turnaround in the sector's financial performance.