Power sector in 2023: Navigating demand spike and the rise of renewables

The power minister highlighted the urgency stating that India needs an additional 80 gigawatts of thermal power capacity under construction to meet the escalating power demand.

And this is only expected to get bigger as the power demand is expected to surge to an all-time high of 255 gigawatts in the next year.

To put this into perspective, India's total power capacity stands at 426 gigawatt with over 50% coming from thermal sources. The plan is now to add 80 gigawatt to the current 239.

Booming demand for coal catapulted shares of Coal India and NTPC into the spotlight. The thermal power generation companies that were once considered a slow moving giants became hot stocks this year, NTPC outpaced the broader market reaching over ₹305 a piece now from around ₹165 in January 2023.

Along with NTPC, Coal India also marked its best year. At the start of the year, it was at about ₹218 and it is now at about ₹356 a piece.

With the industry keeping an eye on India's net zero by 2030, a promise made at COP 26 two years ago, this year marked a revival of many companies in the sector.

The star player from renewables this year has been Suzlon Energy, shares of Suzlon which hit a bottom at around ₹7 at the end of March this year witnessed a remarkable turnaround. The stock price is currently at around ₹37 a piece. Once considered a penny stock, it has transformed into a multi bagger in less than a year, standing strong as a testament to the growing investor confidence in India's renewable energy sector.

Another star performer is IREDA, a government run finance company focused on renewable energy. The stock listed at a premium of 56% to its issue price and continued to soar giving almost 200% returns to its shareholders since listing.

The government, cognisant of the need for innovation in renewables, introduced the scheme for viability gap funding. This includes substantial financial support for the development of battery energy storage systems (BESS) aiming to reach about 4,000 megawatt hours by 2030- 31. This funding is worth over ₹3,760 crore.

Along with BESS for round the clock power plants and emerging theme has been pumped hydro storages. NHPC plans to invest ₹1.7 lakh crore to establish pumped hydro power storage capacities of about 20,000 to 22,000 megawatt across India.

India's installed renewable energy capacity is set to soar 270 gigawatt by March 2025, a significant rise from the current 133. This, as the power minister suggested, will be through both public and private sector investments.

As India grapples with the dual challenge of meeting immediate power demands and aligning with global green energy goals, the nation's power sector stands at crossroads navigating a delicate balance between tradition and transformation.