“The energy you invest in change will come back to you in exponential rewards.”
Illuminating India’s Power Sector
India is the 3rd Consumer & producer of electricity worldwide, emerging as a global leader as it is the only G20 nation that is on track to achieve the targets under the Paris Agreement.
As the demand for electricity continues to soar, the country is making significant strides toward strengthening its power infrastructure and ensuring energy security.
But How do we Benefit from it? Finkhoz! Will Help you understand through this blog!
1. Installed Capacity: A Benchmark for Growth
India’s installed power capacity has witnessed impressive growth over the past decade with a CAGR of 5.46%.
India’s total installed electricity generation capacity reached 446.2 GW in 2024, making India the third-largest electricity producer globally with 25% of its Installed Capacity being in Renewable Energy sources.
India is also focusing on renewable energy sources with an ambitious target to achieve 500 GW of renewable energy installed capacity by 2030, along with a net-zero emissions goal by 2070.
An increase in Installed capacity does signify good developmental prospects but if the additional energy generated is not being utilized it signifies a lack of appropriate infrastructure/distribution system.
2. India’s Per Capita Consumption: A Tale of Growth and Opportunity
India’s per capita consumption was 1,395 kWh in the year 2024, which is a 4.81% increase from the previous year.
India has a rising pattern in the per capita consumption of electricity from the past decade, this could be better understood by analyzing India’s Per capita consumption trend.
2.1 India’s Per Capita Consumption Trend
India’s per capita electricity consumption has been steadily increasing with a CAGR of 3.47% reflecting the growing demand driven by economic growth and an expanding population.
In 2023, India’s per capita consumption was around 1,300 kWh, which is significantly lower than the global average of 3,000 kWh.
Improved rural electricity access and government initiatives like DDUGJY are expected to boost energy consumption in the coming years.
2.2 India’s Per Capita Consumption Compared to Large Economies
While India’s per capita consumption has been growing steadily, it still lags behind many developed economies. Here’s how India compares in terms of electricity consumption per person:
Though India is the 5th Largest Economy of the world with a GDP of 3 Trillion USD, still India’s Per Capita consumption ranks even below the country of Mexico with 13th GDP rank.
2.3 Expectations for India’s Per Capita Consumption
Based on the current growth trend, India’s per capita electricity consumption is expected to rise to 3,000 kWh by 2040. This growth is driven by urbanization, industrialization, and an increased focus on improving electrification in rural areas.
India’s growing electricity demand makes it one of the largest consumers globally. However, the country still ranks low in terms of per capita consumption. India is currently ranked 126th in the world in terms of per capita electricity consumption, reflecting significant room for growth.
3.Deficit to Surplus: A Turning Point
A country must have appropriate energy to operate efficiently, power is either in deficit or surplus, solely increase in installed capacity does not signify growth, the country’s energy deficit/surplus position signifies that enough energy requirements are being fulfilled.
Installed capacity capitalizes on the potential whereas the deficit trend indicates if the potential is being capitalized or not.
`
Over the years, India has made tremendous progress in bridging its power deficit. In 2008, India faced a power deficit of over 10%,compared to less than 1% as of 2024.
This reduction is attributed to enhanced infrastructure, better power distribution networks, and an increased share of renewable energy sources.
Despite the improvements, some regions still experience localized deficits, particularly during extreme weather conditions or peak demand seasons. However, the ongoing infrastructure expansion and focus on energy storage systems are helping mitigate these issues.
India has moved from an energy deficit country to an energy surplus country as of the recent years.
5. Reasons to Invest in India’s Power Sector
India’s power sector presents an attractive investment proposition due to several compelling reasons:
- Rapid Economic Growth: With a growing population and increasing industrialization, the demand for electricity is expected to rise exponentially.
- Government Focus on Renewable Energy: India has set ambitious renewable energy targets, creating opportunities in solar, wind, and green hydrogen sectors.
- Favorable Policies: The Government of India is actively promoting investments in energy infrastructure through policy reforms, tax incentives, and the creation of an enabling environment for private players.
- Energy Transition: India’s commitment to achieving net-zero emissions by 2070 is driving investment in clean energy technologies.
- Infrastructure Modernization: The government’s focus on modernizing the transmission and distribution networks is a major opportunity for growth in the sector.
5.1 Government of India Targets: Renewable and Thermal
India’s power sector is undergoing a transformation, with renewable energy playing a pivotal role. The government aims to achieve:
- 500 GW of renewable energy capacity by 2030, with a focus on solar, wind, and hydro power.
- Accelerated thermal power capacity to ensure stable baseload generation, complementing renewable energy.
Thermal power still accounts for over 60% of India’s total capacity, though its share is expected to decrease as renewable sources increase. India is also emphasizing energy storage systems to balance the intermittency of renewable energy.
5.2 Global: Renewable and Thermal Energy Targets
Globally, many countries are increasingly prioritizing renewable energy over thermal generation. The Paris Agreement mandates countries to reduce carbon emissions, leading to a global shift toward cleaner energy. Several nations, including the United States, China, and the European Union, have set ambitious renewable energy targets:
- The United States has set a target to reach 100% clean energy by 2035.
- China, the world’s largest emitter, has a target to achieve carbon neutrality by 2060 and is investing heavily in solar and wind energy.
- The European Union aims to generate 40% of its energy from renewable sources by 2030, with a focus on wind and solar.
Despite the global shift toward renewables, thermal energy continues to play a crucial role in energy security, especially during the transition phase.
6. Supportive Government Policies and Tax Incentives for Renewable Energy
The Government of India has introduced several policies and incentives to promote the growth of renewable energy, including:
- Production-Linked Incentive (PLI) Scheme: This scheme focuses on boosting the domestic manufacturing of solar PV modules, with an outlay of ₹14,007 crore for capacity expansion.
- Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II): This scheme promotes electric vehicles, which is linked to cleaner energy consumption.
- Tax Incentives: Tax incentives, including 100% tax exemptions for income from renewable energy projects, are designed to encourage investment in this sector.
- Renewable Energy Certificates (RECs): These certificates allow companies to meet renewable energy purchase obligations by buying renewable energy credits, which supports the market for renewables.
- Net Metering: This allows consumers to generate their own electricity through solar panels and sell excess power back to the grid, reducing energy costs and promoting the adoption of solar energy.
- Tax benefit to compnies
In addition to these, the government is working to simplify regulations, enhance grid infrastructure, and promote private sector participation in renewable energy development.
Conclusion
India’s power sector is one of the largest and fastest-growing globally. India has a target to reach 500GW by 2030 out of which India currently has 158GW of installed capacity from the targeted Renewable sources. India is the world’s 3rd Largest producer & consumer of electricity, on the basis of per-capita consumption, India still has a room for growth expecting it to increase from 1395 Kwh to 3000 kwh, though still lagging behind in this prospect but in turn reducing the deficit of energy in India and converting India to an energy surplus nation, exporting energy to Nepal & Bangladesh. There are a ton of reasons to invest in this sector, might it be due to the supportive government policies & initiatives or the above discusses various parameters.
Disclaimer
This report has been prepared solely for informational purposes based on publicly available data and sources deemed reliable. The author has exercised reasonable care to ensure the accuracy of the data used; however, neither the author nor their organization guarantees the completeness or accuracy of this report and disclaims all liability for any loss or damage arising from its use. The author affirms that this report has been prepared independently, without any conflict of interest or financial compensation from any company or entity mentioned herein.
Data sources:
Central Electricity Authority.
Ministry of Power.
Ministry of Statistics and Programme Implementation (MOSPI).
The Press Information Bureau (PIB).
IBEF’s reports.
