Every year on July 10th, Global Energy Independence Day is celebrated worldwide to raise awareness about alternative energy sources. This includes promoting various forms of renewable energy, such as solar, wind, and geothermal energy.
On a domestic level, India has become a country with a significant power demand due to its rapidly growing economy and population. The demand for power in the country is increasing every year, and this trend is expected to continue in the future.
In this article, we will discuss India’s current energy situation, its demand, how India is meeting this demand, investment opportunities for investors, and future challenges.
What’s Happening?
Energy demand in India is rising rapidly. According to reports, in June 2024, the country’s electricity consumption was approximately 152.38 billion units, about 9% higher than the previous year. Additionally, according to the Ministry of Power, India’s electricity demand could exceed 400 gigawatts (GW) by 2031-32. This growth is driven by industrial development, urbanisation, and the power needs of the growing population.
How is India Meeting This Demand?
India uses various sources to meet its energy demand, including coal, hydropower, solar energy, and wind energy. Currently, coal-based thermal power contributes the most to India’s energy production, but the government is continuously promoting the use of renewable energy.
India’s Power Generation
India’s power generation is heavily dependent on coal, although the government is striving to increase the contribution of renewable energy.
Coal powers most of India, but the government aims to add more renewable energy.
Coal-based Thermal Power: Most of India’s electricity production comes from coal-based thermal power plants, accounting for 75.82% of the total power generation.
Hydropower: Hydropower, a clean and renewable energy source, primarily comes from the hilly regions of the Himalayas where water availability is sufficient. Hydropower, including small-hydro, contributes 6.63% to India’s total power generation, playing a crucial role, especially during the monsoon season.
Nuclear Energy: Nuclear energy also plays a significant role in India’s energy production, currently contributing 2.76% to the total power generation.
Solar Energy: Solar energy contributes approximately 7.52% to the total power generation. With government incentives and projects, its contribution is expected to increase in the future.
Wind Energy: Wind energy, particularly in coastal areas, is an important renewable energy source, contributing 3.95% to the total power generation.
Challenges in the Power Sector
Due to India’s population and industrialisation, power demand is increasing. It is estimated that by 2031-32, India’s electricity demand will exceed 400 gigawatts. To meet this growing demand, India will need an installed capacity of 900 gigawatts by 2031-32, which is a significant challenge.
A large part of India’s electricity production comes from coal-based thermal power, which is not only harmful to the environment but also expensive. Additionally, the quality and availability of coal are critical issues.
What’s in it for Investors?
The changes occurring in India’s power sector present many opportunities for investors. Let’s look at some major companies playing a vital role in the Indian power sector.
This table shows the performance of some companies in the power sector over recent years.
NTPC: It is India’s largest power-producing company and the sixth-largest thermal power producer in the world.
Power Finance Corporation (PFC): A non-banking finance company (NBFC) that finances companies in the Indian power sector. It provides loans for projects as well as advisory services.
Tata Power: India’s largest integrated power company with a significant presence in solar, hydro, wind, and geothermal sectors. It contributes 52% to the total production capacity in the private sector.
Adani Power: One of India’s largest private thermal power producers, with a total production capacity of 15.25 GW.
NHPC: India’s largest hydropower utility company.
Power Grid Corporation of India: The largest transmission company in India, responsible for interstate transmission, coordination, supervision, monitoring, and control.
What’s Next?
According to Money Control, by the end of FY2025, India’s electricity production rate is expected to grow at the fastest pace in a decade, primarily driven by coal-based energy production, which will grow at 8.9%, surpassing the 8.2% growth rate of renewable energy.
However, the Indian government has set an ambitious target of achieving 500 GW of installed renewable energy capacity by 2030, with significant contributions from solar and wind energy. Additionally, 85 GW of additional thermal capacity is to be installed by 2032. To achieve this challenging goal, Finance Minister Nirmala Sitharaman has initiated schemes like rooftop solar projects and various initiatives to promote the renewable energy sector.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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