New Delhi, India’s thermal power sector is set to receive a substantial private investment of ₹77,000 crore between fiscal years 2026 and 2028, according to a report by Crisil Ratings. This significant influx of capital underscores a marked return of private sector involvement, driven by the critical need for base-load capacity amidst surging electricity demand. While India pushes for a green energy transition, these investments are vital for ensuring energy security and stable power supply for growing urban and industrial needs.
The projected private investment represents a significant shift, with the private sector expected to contribute nearly one-third of the total ₹2.3 lakh crore investment in thermal power over the next three years. This marks a notable resurgence of private players in coal-based projects after a prolonged period of limited engagement. The renewed interest is largely attributed to the re-emergence of long-term power purchase agreements (PPAs), with four state power distribution companies recently signing 25-year contracts with private thermal producers—the first such agreements in a decade. These long-term PPAs offer more predictable revenue flows and reduced financial risks, significantly enhancing the bankability of thermal projects.
Much of the upcoming capacity expansion will be realised through brownfield projects, which involve expanding existing facilities rather than building new ones from scratch. This approach offers distinct advantages, primarily by circumventing complex land acquisition issues and leveraging existing infrastructure, including crucial pit-head coal linkages. This strategy is anticipated to reduce project timelines and ensure faster execution, bringing new capacity online more swiftly to meet immediate energy demands. Leading private players such as Adani Power, Tata Power, JSW Energy, and Vedanta Power are at the forefront of these expansion efforts, focusing on developing projects that are both operationally viable and financially structured for stable returns.
Vedanta Power, for instance, is preparing for a demerger, with plans to operate as a standalone entity and add 15 GW of capacity, predominantly through brownfield expansion. This includes the revival of 2,200 MW of existing assets, such as the 1,200 MW Chhattisgarh Thermal Power Plant and 1,000 MW at Meenakshi, both benefiting from existing infrastructure and proximity to coal sources. These new projects are designed to function under a two-part tariff structure of ₹5.5–₹5.8 per unit, with 60% fixed income providing predictability, and the remainder following a cost-plus formula. Crisil estimates that these projects will deliver an internal rate of return (IRR) of 15%, making them financially attractive for timely execution.
While India remains steadfast in its commitment to a zero-net-carbon future and a rapid transition to renewable energy sources, the continued investment in thermal power underscores the immediate necessity of meeting the nation’s escalating electricity demand and ensuring grid stability. These thermal power projects provide essential base-load capacity, complementing intermittent renewable sources like solar and wind. By ensuring a stable and reliable power supply, these investments support industrial growth, improve the quality of life in eco-friendly cities, and contribute to equitable access to energy for all citizens, even as the larger shift towards sustainable energy continues to gain momentum.
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