India's power capex to surge to Rs 5 trn annually in FY2030, most investment in renewables: UBS Research

The report projected an 11 per cent compound annual growth rate (CAGR) in power-related capex from FY24 to FY30, compared to the current annual spending of approximately Rs 3 trillion.

"We forecast an overall power-related capex CAGR of 11 per cent over FY24-30 reaching more than Rs 5 trillion annually in FY30E, compared with the current annual run rate of around Rs 3 trillion," it said.

The report noted that most of this investment is expected to come from renewable energy projects and the upgrading of Transmission and Distribution (T&D) networks.

India has set a target to achieve 50 per cent of its installed power capacity from renewable sources by FY30, requiring a total non-fossil fuel capacity of 500 gigawatts (GW). To support this transition, the country will also need to scale up equipment manufacturing and related infrastructure.

UBS Research has also outlined three possible scenarios for capacity addition and capex growth. In the base case, India's installed power capacity is projected to grow at a CAGR of 8 per cent, reaching 690GW by FY30.

The upside case, based on the government's 2030 targets, assumes a 10 per cent CAGR in capacity and a 13 per cent CAGR in capex. In the downside case, the capacity CAGR is estimated at 6 per cent, indicating a slower expansion.

The report highlighted four key verticals that will drive this growth. Conventional power generation is expected to see slow growth, while renewable energy capacity addition is likely to expand at a faster pace. Investment in transmission and distribution networks is expected to be a mix of short-term and long-term projects, often backed by state guarantees that result in lower yields but require less capital.

Additionally, infrastructure projects have opened up new opportunities for power financiers like REC and PFC, which are now participating in airport and road projects, either independently or through consortiums.

With India's increasing focus on clean energy and infrastructure expansion, power sector investments will play a crucial role in meeting future energy demands while aligning with sustainability goals. (ANI)