Power sector value chain reset: Report
AI Summary
India's power sector is poised for a reset with major investments in transmission, energy storage and grid modernization expected to expand capacity to 900GW by 2032. The sector faces challenges in timing infrastructure development but benefits from regulatory reforms and government support to improve efficiency and financial sustainability.
New Delhi: India's electricity system is heading into a synchronised reset across generation, transmission and distribution, with transmission capex and energy storage emerging as the critical enablers for the next decade, Macquarie Equity Research said in a research report.The brokerage expects India's installed capacity to expand from 538GW today to 900GW by FY32E. The growth will follow a dual-track path according to the brokerage. Coal will continue to anchor baseload stability with plant load factors above 65 per cent, while renewables drive the bulk of incremental capacity. However, this transition is contingent on deploying 74GW of energy storage by the end of 2032 to manage intermittency and meet evening peak demand.Read more: India allows 4 China-linked firms to bid for power projectsPeak power demand hit a record 271GW in May 2026 during an intense heatwave, leaving minimal operating headroom. The Central Electricity Authority projects power demand to grow at a 6 per cent CAGR by 2030. With industrial activity at 50 per cent of consumption, structurally rising cooling demand accounting for higher than 20 per cent of incremental growth, and new high-load segments such as data centres and electrified transport. The IEA expects India's electricity consumption to grow at 6.4 per cent annually through 2030 -- the fastest among major economies.The report highlights a clear pivot to a transmission-led capex super-cycle. To evacuate 500GW of non-fossil capacity by 2030 and 900GW by 2035-36, India will need US$51 billion in transmission investment. A key challenge is timing: generation assets take 12-18 months to build, while transmission corridors take 36-48 months. Without proactive inter-regional development, curtailment risk rises. The grid lost 2,300GWh between May-Dec 2025 when mid-day solar surges exceeded absorption capacity.In distribution, Macquarie sees a structural turnaround. Under the Revamped Distribution Sector Scheme (RDSS), Rs2. 83 trillion has been sanctioned for infrastructure upgrades and 203 million smart meters are planned. Resulting in a drop in AT&C losses to 15 per cent vs 22 per cent in FY 2021, and DISCOMS posted a Rs 25 billion profit in FY 2025 after decades of losses. Overdue payables to generators have also dropped to under Rs500 billion from Rs1. 4 trillion earlier, aided by Late Payment Surcharge rules.The Revamped Distribution Sector Scheme (RDSS) is a Government of India initiative launched in 2021 to improve the operational efficiencies and financial sustainability of State-owned power distribution companies (DISCOMs).Regulatory reforms are reinforcing the shift. The Draft National Electricity Policy 2026 signals a move to market-based systems, with coal repositioned as flexible balancing capacity rather than rigid baseload. The Electricity (Amendment) Bill 2026 aims for cost-reflective tariffs and regulated competition in distribution, while the India Energy Stack is being built to enable peer-to-peer trading and monetisation of distributed assets.Read more: Tata Power offers 'pay-as-you-save' scheme with rooftop solar system for commercial users in PunjabOverall, Macquarie said the sector is moving from sporadic state-led initiatives to an interlocking central framework spanning the entire value chain. With 50GW/year of capacity addition underway and Rs9. 15 trillion earmarked for transmission by 2032E, the next phase of growth will be defined by how quickly transmission and storage can keep pace with demand. (ANI)