BT500: Here’s why India’s power companies are accelerating investments at breakneck speed

However, with the government announcing around 80 GW of new thermal capacity addition, coal-based power plants will continue to remain the largest player in India’s energy mix for the next few decades to meet the surging power demand. Various assessments peg a financing opportunity of around $40 trillion in the next 10 years in the areas of power generation, battery storage, and upgrading transmission infrastructure.

Power companies have seen immense growth during the BT500 study period—from October 2023 to September 2024. Dominant companies, like Adani Power and Tata Power Company, saw a rise of 114% and 74% in their respective one-year average market capitalisation (m-cap) during the study period. Smaller players in renewable energy are doing exceptionally well too. Take for example, Waaree Renewable Technologies. Its one-year m-cap has seen a phenomenal growth of 678% . Last month, the Rs 4,321-crore initial public offering (IPO) of Waaree Energies—a part of Waaree group—which manufactures solar panels, saw bids worth Rs 2.4 lakh crore and since listing, the stock rose 142% above its issue price on November 6.

The public-sector undertaking (PSU) SJVN, a hydroelectric power generator, saw a sizeable growth of 185% over the study period. Some big players like NTPC, Tata Power and JSW, which are also expanding their green energy portfolios along with a focus on thermal energy, improved their ranking also.

Indian companies are now gearing up for a transition to renewable energy. Tata Power has announced that it will become carbon neutral by 2045 and will achieve 70% of power generation from renewable energy (RE) sources by 2030. The company plans to invest $9 billion to quadruple the existing RE capacity to 20 GW over the next five to six years. It has also set up a greenfield 4.3 GW solar cell module manufacturing plant in Tirunelveli, Tamil Nadu, and has plans to set up 2.8 GW of pumped storage capacity worth Rs 13,000 crore in the country.

“Almost 95% of our investments over the next five years will be dedicated to expanding clean and green energy capacity and enhancing transmission and distribution infrastructure. While we are gearing our efforts towards putting in more RE capacity, we are cognisant of the fact that they are intermittent and need support from storage technologies to ensure meaningful and complete energy transition,” Praveer Sinha, CEO & MD of Tata Power, tells Business Today.

GOING FOR GROWTH

India is looking at a substantial increase in power demand. According to official estimates, power demand is set to rise at a compound annual growth rate (CAGR) of more than 7% from the previous estimate of 5%, with the central government looking to revise the National Electricity Plan (NEP).

As part of its India energy monitor released recently, Fitch Ratings forecasts thermal power capacity to expand at a measured pace over the next three to five years, despite the push for renewable energy. “We predict an annual addition of 5-6 GW in thermal capacity in the medium term, compared with an average of about 3 GW per annum between 2020 and 2023,” the rating agency said.

Subhadip Mitra, Executive Director of brokerage Nuvama Institutional Equities (Power, Renewables, Industrial Research), says the government has made it clear that India’s energy security is as important as the green transition.

“The NEP mentions that we will add new thermal capacity by FY32 and beyond that we will maintain that. Even to maintain thermal capacity beyond FY32, you would realise that around 50 GW of thermal capacity would have reached retirement age or surpassed it. Between FY30-35, there may be a requirement of 50 GW thermal replacement,” Mitra tells BT.

For larger players in the thermal sector such as NTPC, JSW Energy, and Adani Power, Mitra says they may keep investing in thermal for another two to three years and then possibly venture into the thermal replacement cycle.

The NEP and NITI Aayog documents indicate that India’s thermal dependency may remain till 2050, by when renewables capacities will catch-up, says Mitra. “Till then, incremental growth in power demand is likely to be met by renewables while existing demand will still need thermal to meet base load requirements,” he adds.

During the study period, other power players like JSW energy, Jaiprakash Ventures, NLC India Limited, and Torrent Power also improved their rankings based on the average m-cap.

Sharad Mahendra, Joint MD & CEO of JSW Energy, says the company’s focus remains on supporting India in its ambitious journey towards a net-zero carbon future by providing solutions for round-the-clock green energy thorough solar, wind & energy storage mix.

“With backward integration, transformative technologies, innovative offerings, and ongoing projects in solar, wind and energy storage, we are on track to achieve a 10 GW capacity by 2025 and 20 GW significantly earlier than 2030. Our vision is to shape a greener future while delivering strong economic value for our stakeholders,” Mahendra tells BT.

HEADWINDS AHEAD

Credit rating agency ICRA says investments over Rs 3 lakh crore are needed every year in renewable energy to take India’s installed green capacity to 440 GW by 2030.

Girish Kumar Kadam, Group Head Corporate Sector Ratings at ICRA Ltd, says India has made significant progress in renewable energy capacity addition with a strong policy focus, but factors such as energy storage, grid integration, and fully-integrated renewable energy equipment manufacturing pose challenges.

“The evolving landscape presents both risks and significant investment opportunities, especially as the demand for cleaner energy sources intensifies. The sector’s growth potential is immense, provided the government addresses these pressing issues expeditiously,” Kadam says.

The Indian Energy Exchange (IEX) has been hit in terms of m-cap. The average market capitalisation of the largest power exchange platform, which handles more than 90% of power deals, was Rs 14,404 crore in FY23. In FY24, it fell to Rs 12,506 crore. This fall is attributable to the government’s decision to implement market coupling in power exchanges.

Market coupling is a process that matches bids from all the power exchanges to discover the uniform market clearing price.

Power demand is now driven by new areas such as EVs, data centres, and increased electrification across industries. Ensuring non-intermittent power supply through investment in storage capacity remains a key focus area for companies.

Arun Kailasan, Analyst, Fundamental Research at financial services firm Geojit, says battery storage is undergoing a transition and even a good amount of capex allocation could turn out to be meaningless with evolving technology. “Batteries are getting more push from recent government tenders and pump storage is also gaining attention. Only time will tell how the storage sector will play out, and we keep a very neutral stand on it,” says Kailasan.

Among other challenges, Kailsan believes many power projects are getting delayed not because of execution but because of improper transmission infrastructure and land-related issues.

As the country’s power demand rises in tandem with economic growth, it will be important to watch how companies scale up their capacities and come up with innovative solutions to shift to a greener future.

@richajourno