New Delhi: Coal-based power will continue to play a vital role in meeting base load requirements in the medium term, even as renewable energy capacity grows steadily, India Ratings and Research (Ind-Ra) said on Wednesday. In a webinar, Ind-Ra experts noted that thermal capacity additions are set to accelerate in FY26, supported by ongoing construction activity and projected demand up to FY32.
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"We expect thermal power to remain critical for base load management in the medium term, though renewable capacity additions remain strong. Land acquisition, connectivity and adequate evacuation/transmission infrastructure remain key monitorables for the sector. The consistent functioning of the Late Payment Surcharge Rules 2022 supports the counterparty risk, even among entities selling directly selling to discoms," said Vishal Kotecha, Director & Head - Infrastructure & Project Finance, Ind-Ra.
Kotecha explained that base load represents the minimum demand observed during a day — typically lowest at night when solar generation ceases — making non-solar capacity, particularly thermal, essential for meeting this demand.
Ind-Ra has maintained a stable rating outlook for thermal power projects for the remainder of FY26, supported by healthy plant load factors (PLF), reliance on thermal generation, high revenue visibility from long-term power purchase agreements (PPAs), and adequate internal liquidity.
Between FY25 and April–July FY26, PPAs covering over 17 GW of new capacity were in different stages of approval by state electricity regulatory commissions, including tendering and power purchase signings, indicating sustained demand for thermal capacity. Of this, agreements for 2 GW have already been signed.
Thermal power plants contributed 71.5 percent of total generation in Q1 FY26, accounting for 49.9 percent of installed capacity. Ind-Ra projects thermal PLFs will remain healthy at 69–70 percent in FY26 and FY27, aided by adequate coal stocks.
Merchant power prices during non-solar hours have declined since May 2025 due to the monsoon season but are expected to rise after the monsoons, from September–October 2025. Coal-based capacity addition in Q1 FY26 stood at 2.3 GW, compared with 4.53 GW in FY25.
Divya Charen C, Associate Director at Ind-Ra, said the agency expects strong renewable capacity growth in FY26, backed by a robust project pipeline. In Q1 FY26 alone, 12.2 GW of solar and wind capacity was added, following 28 GW in FY25.
Ind-Ra has also maintained a stable outlook for solar and wind power projects, citing strong historical generation performance, timely payments from counterparties, and comfortable internal liquidity.
"We expect strong capacity additions in FY26, supported by a large under-construction pipeline. Ind-Ra expects sustained traction in renewable tenders, with hybrid/storage/round-the-clock tenders garnering share. Also, Ind-Ra observes that developers are offering hybrid capacity for industrial and commercial consumers rather than just solar capacity earlier," Charen said.
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This shift, she explained, is linked to expectations that distribution companies (discoms) will charge lower tariffs during solar hours and higher tariffs during non-solar hours. As a result, hybrid capacity offers consumers greater potential savings compared with solar-only capacity.
