June 2025

Power demand is very closely correlated with economic activity, and it is critically important that India’s power supply keeps pace with growing demand – otherwise, GDP growth will run into bottlenecks. This alone requires a big ramp up in capacity. In addition, India is going through an energy transition driven by the need to decarbonise. That is another big challenge. By 2032, India aims to expand generation capacity from the current 475 GW to 900 GW, and to reduce its dependence on thermal to below 30 per cent from the current over 70 per cent. At least Rs 12 trillion will be required to build the requisite renewable energy capacity, while Rs 3.5 billion will be needed to set up additional thermal capacity. While solar and wind are ramping up, changes in the energy mix also necessitate smarter grids and a vast increase in storage, and present multiple other engineering challenges. If 500 GW of non-fossil-based capacity is to be added, the grid must be rejigged to integrate large-scale renewable energy. There are also inefficiencies within the system, leading to high AT&C losses. Political compulsions to provide subsidised or free power to certain consumers make it harder achieve commercial viability. Last year, 29 GW of renewables capacity was added. It is likely that wind and solar will together contribute another 40 GW of capacity annually (more solar than wind). Even so, the base load remains dependent on thermal. Nuclear may be a long-term solution to tackle the base load plus decarbonisation, but nuclear plans have not yet gotten off the ground. Transmission systems have added capacity, though it has been slower than desirable. AT&C losses have eased over the years, though there were slippages in financial year 2024 compared to financial year 2023. Aggregate monetary losses have also fallen substantially. But losses remain high in absolute terms, and discoms are plagued by high debt, negative net worth and uneven smart metering. Outstanding dues from discoms to independent power producers stand at Rs 819.02 billion. Long-term solutions must be found to put the sector on a viable financial footing. The Rs 3 trillion Revamped Distribution Sector Scheme may help. Privatisation, where it has occurred (Delhi, Odisha), does seem to have helped, and more privatisation is on the way, with Uttar Pradesh, for example, coming up for bids. If targets are to be met, there must be a build-up of manufacturing capacity across
the solar and wind chains. This means more capacity to make modules, cells, wafers, ingots and polysilicon in the solar space, and similarly, capacity for blades, tower flanges, generators and gearboxes for turbines in the wind space. Local sourcing norms may also stretch turbine makers thin in the short run. Moreover, offshore wind evacuation requires infrastructure such as subsea cables, offshore substations and high-capacity HVDC or HVAC systems to connect to the grid, and this marine infrastructure has to be built if offshore is to take off. Delays in project execution continue due to difficulties in securing environmental and forest clearances. In addition, right-of-way roadblocks, land acquisition hurdles and local opposition have often pushed project timelines well beyond schedules. Policymakers have to find ways to accelerate these processes, while paying heed to sustainability and environmental concerns. While there are huge issues and challenges, there are also vast opportunities across the power sector. Progress is already apparent in many areas, and we must hope that policymakers will find ways to address apparent pain points and remove hurdles as thetrends play out