Citi Industry report, 6 May 2026 | Industry distillation
THE HEADLINE STORY
India is in its first-ever multi-vector capex upcycle — thermal + renewables + transmission + grid storage, all running in parallel. This isn’t a single-theme rally. It’s broader, more durable, and policy-anchored.
GENCO capacity additions over FY26-32E are projected at 2.3-2.5x the FY19-25 levels.
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THIS CYCLE vs LAST CYCLE (FY04-12 vs FY24-32E)
The risk has fundamentally migrated:
• Old problem:
Aggregate energy shortage, weak fuel supply, weak grids
• New problem:
“Not enough dispatchable energy at the right hour” — non- solar-hour adequacy
• Old demand:
Industrial capex (steel, cement, infra)
• New demand:
Cooling, data centers, electrification, PLI manufacturing — broader base
• Old build:
Coal IPPs (UMPPs, sub/supercritical)
• New build: Parallel buildout — RE + thermal + storage + transmission + nuclear
• Old risk: Fuel shortages, imported coal shocks, over-leverage, DISCOM insolvency
• New risk: Execution, dispatchability, contracting quality, weather sensitivity
• Old policy: Capacity expansion focus
• New policy: CEA resource adequacy plans, long-term transmission/generation plans
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⚡ DEMAND DYNAMICS
Long-term trajectory:
• ~5% CAGR over past 2 decades
• Medium-term forecast: 5-6% CAGR
• FY26 saw weather-driven softness (~1% growth) — viewed as outlier, not trend break
• El Niño tailwinds expected in 2026 (boosts agri-pump + cooling demand)
Peak Demand Story:
• 2010: ~119 GW → 2025: ~250 GW
• CEA expects 265-270 GW peak in 2026
• By FY32E: ~351 GW projected
NEW LOAD VECTORS driving the next leg:
1️⃣ Data Centers — currently ~1.5 GW IT load (Mumbai, Chennai, NCR, Bengaluru). Could reach 10-15+ GW by FY32/35, accounting for ~2.5-3% of national peak by 2030/32. Recently, DCs being granted DISCOM licenses.
2️⃣ Cooling load — AC penetration rising sharply
3️⃣ Electrification of end-uses traditionally on other fuels
4️⃣ EV charging
5️⃣ Green hydrogen — long-dated industrial layer
6️⃣ PLI-linked manufacturing — sticky industrial base
7️⃣ Energy security concerns post Middle East crisis
⚠️ Key shift: More demand is now weather-sensitive AND time-of -day sensitive — evening/night peaks now stress the system more than daytime.
Sectoral mix: Residential + Agri form a sizeable proportion → more weather-sensitive system overall.
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SUPPLY MIX — WHERE THE MONEY IS GOING
Current state (FY26):
• Total installed capacity: ~533 GW (doubled since 2014)
• Non-fossil share: ~50% (~275 GW)
• Solar: 150 GW | Wind: 56 GW
• Coal: 222 GW | Gas: 20 GW | Hydro: 51 GW | Nuclear: 9 GW
CEA’s FY32 trajectory:
• Total capacity: ~821 GW (could go higher if demand surprises)
• Coal: ~272 GW |
Solar: ~295 GW |
Wind: ~97 GW |
Nuclear: 15 GW
• RE share (incl hydro): rising from 27% → 35%
Capacity additions outlook:
• ~44-45 GW/year over FY26E-32E
• vs ~19 GW/year over last 7 years
• That’s a ~2.3x step- up
⚫ COAL — Still very much alive:
• ~97 GW additional coal capacity under construction or planned by 2032
• Coal generation rises from 1,250 BU (FY26E) → 1,536 BU (FY32E)
• Positioned as a reliability asset, not a growth asset
• Night-time peaks need dispatchable capacity
☀️ RENEWABLES — Largest incremental contributor:
• Solar nearly doubles by FY32E
• Wind grows from 56 → 97 GW
⚛️ NUCLEAR — Ambitious national plan:
• National target: 100 GW by 2047
• Capex guide: ~Rs200mn/MW
• Tariffs: Rs6-8/kWh under cost-plus RoE
• Long-duration assets (60-year life)
• Must-run status in merit order
🏔️ HYDRO + STORAGE:
• Hydro: 51 → 59 GW by FY32E
• Storage becoming the new “coal availability equivalent” of the last cycle
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🔋 STORAGE — THE BREAKOUT THEME
CEA’s energy storage roadmap (cumulative):
• 2026-27: BESS 6 GW + PSP 5 GW = 11 GW
• 2030-31: BESS 28 GW + PSP 32 GW = 60 GW
• 2035-36: BESS 80 GW + PSP 94 GW = 174 GW
Storage required to avoid peak deficit: ~10 GW by FY27E, ~11 GW by FY29E
Why it matters: Solar curtailment events between May-Dec 2025 highlighted the operational difficulty of integrating large RE volumes — daytime demand-supply mismatch, limited coal ramping, transmission bottlenecks.
CEA flags risk of Planning Reserve Margin turning negative in non-solar hours over FY27-29 if capacity slips.
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🔌 TRANSMISSION — MASSIVE OPPORTUNITY
📋 Two major CEA plans frame the next leg:
Plan 1 — March 2026: “Transmission Plan for 900+ GW Non-Fossil by 2035-36”
• 1,37,500 ckm of lines + 8,27,600 MVA substation capacity
• Cost: Rs7.93 trillion over FY27-FY36
• Focus: RE evacuation from Rajasthan, Gujarat, AP, Karnataka, Maharashtra
• Covers both ISTS and intra-state systems
Plan 2 — October 2025: “Brahmaputra Basin Hydro Evacuation Master Plan”
• 65GW hydro + 11GW PSP in NE
• 31,397 ckm lines + 109,935 MVA/MW capacity
• Cost: Rs6.43 trillion total
• ~Rs1.9trn till 2035, Rs4.5trn beyond FY35
💰 Total transmission opportunity (industry view): ~Rs15 trillion over the long term when combining domestic + Brahmaputra + international interconnects.
Architecture shift: From incremental network additions → system architecture (765 kV, HVDC corridors, pooling stations, 1,200 kV future).
The principle: Transmission must be planned ahead of generation — line gestation is longer; delays cause curtailment, stranded assets, regional congestion.
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💵 POWER PRICING & MARKETS
Mixed structure:
• Long-term PPAs (cost-plus or lowest-bid) — bulk of supply
• Regulated tariffs
• Merchant/exchange markets — growing
📊 IEX day-ahead snapshot (Apr-May 2026):
• Spot prices range from near-zero during surplus solar hours → near-ceiling levels during evening peaks
• Massive intraday price swings reflect the variable RE integration challenge
• Headline deficits have meaningfully reduced, BUT intra-day variations persist
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DRAFT NATIONAL ELECTRICITY PLAN 2026 — KEY REFORMS
🏛️ Regulatory architecture:
• Electricity Act 2003 = foundation
• CEA = technical standards, planning
• CERC = inter-state tariffs/transmission
• SERCs = intra-state tariffs, DISCOMs
🎯 Resource Adequacy as formal planning discipline:
• CEA: long-term national demand forecasts (annual review)
• SLDCs: state-level forecasts
• Resource Adequacy Plans at national + state + DISCOM levels
Fixing DISCOMs & industrial competitiveness:
• Timely tariff orders (before FY start; true-up within FY; conclude in 120 days)
• From FY27: fully cost-reflective tariffs, no regulatory assets, index-linked auto- revision if delayed
• Monthly pass-through of power purchase costs
• Cross-subsidy reduction — no tariff below 50% of ACoS
• Free power should be avoided; subsidies paid in advance
• Target: single-digit AT&C losses
• Solarisation of agri feeders by 2030
• Pro-competition stance — relief for large users (manufacturing, railways/metro)
DISCOM risk has moved from broad insolvency → more nuanced, selective. SECI and central structures remain important buffers.
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CAPEX FUNDING — WHERE THE CAPITAL FLOWS
• Mix: corporate balance sheets + project finance debt + dedicated infra lenders
• Typical D:E for projects: 70:30 or 80:20
• Equity from internal accruals + own books
Critical RBI data point:
• Power sector’s share of total bank/FI capex tie-up funding jumped to 40% in FY25 (vs 24% in FY24, 20% in FY23)
• This happened even as overall capex tie-ups fell — meaning power is gaining clear preferential allocation
Sectoral breakdown of bank/FI capex funding (FY25):
• Power: 40%
• Roads & bridges: 9%
• Construction: 6%
• Metals: 5%
• Electrical equipment: 5%
• Others: 34% ━━━━━━━━━━━━━━━
🎯 KEY TRENDS TO WATCH
✅ Bullish drivers:
• Multi-vector capex visibility (rare in Indian power)
• Policy anchors providing long-duration support
• Data center buildout creating local grid pressure points
• Storage emerging as a major new investment theme
• Transmission entering structurally larger investment phase
• Nuclear becoming a real opportunity, not just aspiration
⚠️ Key risks for the sector:
• Execution slippages (transmission RoW, RE land/grid connectivity)
• Sustained unfavorable demand variability (weather-linked)
• Adverse regulatory developments
• PPA-less RE pipeline conversion failure
• Storage tariff design / bankability of storage contracts
• Input cost volatility (especially under TBCB transmission tariffs)
• Vendor concentration in transformers/reactors/HVDC equipment
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🧭 BOTTOM LINE
India’s power sector has shifted from a “not enough energy” problem to a “not enough flexible, dispatchable energy at the right hour” problem.
Capital is flowing into a parallel buildout — thermal restart, RE scale-up, transmission rebound, and the first real storage wave — anchored by policy. Demand base is broader, weather- sensitive, and time-of -day sensitive. The next decade is about execution and architecture, not aggregate capacity.
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