India’s power sector is undergoing a multi-year structural transformation. Installed capacity is expected to more than double from 540 GW at present to 1,121 GW by 2036. Equally remarkable is the fact that non-fossil sources will contribute more than 70 per cent of the installed capacity. While coal and solar will continue to make the largest contributions, wind, biomass, hydro, nuclear and green hydrogen will all play a part. Wind, in particular, has seen a rebound in activity.
The increase in installed capacity, along with the integration of nearly 800 GW of sundry renewables, besides hydro and nuclear, will not only require a massive scale-up in transmission and distribution (T&D) infrastructure, but also a huge grid modernisation programme. It will also require the adoption of new technologies to make grids smarter and the creation of storage solutions at a large scale to handle intermittent generation.
While renewables’ adoption was initially driven by carbon reduction policies, cost structures have also changed as renewables have grown cheaper at scale. This has led to further changes in the mix being wheeled on to the grid and consumed captively.This creates a long-term opportunity across the power supply chain. Meanwhile, policymakers have to track multiple goals. Capacity additions in generation, storage and T&D must keep pace with demand. Environmentally, sustainability must be maintained, even though thermal is required for reliable baseload.
Power consumption must be metered and the entire power supply chain must be efficient and economically viable. Achieving all these objectives will require a continuous review of policy and operational impacts. The draft National Electricity Policy (NEP), 2026 highlights multi-pronged approaches. The NEP’s suggestions include developing new coal-based plants near mines and exploring ways to enable financial sustainability of gas-based plants. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India [SHANTI] Bill enables private sector participation, proposes repealing the Atomic Energy Act of 1926 and the Civil Liability for Nuclear Damage Act of 2010, and confers statutory status to the Atomic Energy Regulatory Board.
On the trading front, the introduction of VPPAs (virtual power purchase agreements), reforms to renewable energy certification and discussions on market coupling and capacity market design – all promise to make trading and risk management processes more efficient.
For decades, however, the sector has struggled with challenges such as high aggregate technical and commercial (AT&C) losses, tariff distortions and delays in subsidy disbursements. Meanwhile, the evolving energy landscape, marked by rising electricity demand, greater renewable energy integration and electrification of end-use sectors, is reshaping the role of distribution utilities.
The Revamped Distribution Sector Scheme has started making a difference and the Electricity (Late Payment Surcharge) Rules have improved payment discipline. In FY 2024-25, utilities collectively reported profit after tax of Rs 27.01 billion on an accrual basis at the all-India level, compared to accumulated losses of Rs 6.47 trillion including a loss of Rs 270.22 billion in FY 2023-24. AT&C losses have also declined from 15.97 per cent in FY 2023-24 to 15.04 per cent in FY 2024-25. Billing efficiency has increased from 86.99 per cent to 87.59 per cent and collection efficiency has improved from 96.6 per cent to 97 per cent.
The trajectory indicates the sector will transition to a very different mix, even as it scales up at unprecedented speed. Assuming policy keeps pace with change and momentum is maintained, the power sector will grow fast enough to support a high rate of GDP growth, while remaining environmentally sustainable and financially viable.