Citi Business report, 6 Could 2026 | Business distillation
THE HEADLINE STORY
India is in its first-ever multi-vector capex upcycle — thermal + renewables + transmission + grid storage, all operating in parallel. This isn’t a single-theme rally. It’s broader, extra sturdy, and policy-anchored.
GENCO capability additions over FY26-32E are projected at 2.3-2.5x the FY19-25 ranges.
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THIS CYCLE vs LAST CYCLE (FY04-12 vs FY24-32E)
The chance has essentially migrated:
• Outdated drawback:
Combination vitality scarcity, weak gasoline provide, weak grids
• New drawback:
“Not sufficient dispatchable vitality on the proper hour” — non- solar-hour adequacy
• Outdated demand:
Industrial capex (metal, cement, infra)
• New demand:
Cooling, information facilities, electrification, PLI manufacturing — broader base
• Outdated construct:
Coal IPPs (UMPPs, sub/supercritical)
• New construct: Parallel buildout — RE + thermal + storage + transmission + nuclear
• Outdated threat: Gasoline shortages, imported coal shocks, over-leverage, DISCOM insolvency
• New threat: Execution, dispatchability, contracting high quality, climate sensitivity
• Outdated coverage: Capability enlargement focus
• New coverage: CEA useful resource adequacy plans, long-term transmission/era plans
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⚡ DEMAND DYNAMICS
Lengthy-term trajectory:
• ~5% CAGR over previous 2 many years
• Medium-term forecast: 5-6% CAGR
• FY26 noticed weather-driven softness (~1% progress) — seen as outlier, not development break
• El Niño tailwinds anticipated 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 following leg:
1️⃣ Information Facilities — presently ~1.5 GW IT load (Mumbai, Chennai, NCR, Bengaluru). May attain 10-15+ GW by FY32/35, accounting for ~2.5-3% of nationwide peak by 2030/32. Just lately, DCs being granted DISCOM licenses.
2️⃣ Cooling load — AC penetration rising sharply
3️⃣ Electrification of end-uses historically on different fuels
4️⃣ EV charging
5️⃣ Inexperienced hydrogen — long-dated industrial layer
6️⃣ PLI-linked manufacturing — sticky industrial base
7️⃣ Power safety issues put up Center East disaster
⚠️ Key shift: Extra demand is now weather-sensitive AND time-of -day delicate — night/night time peaks now stress the system greater than daytime.
Sectoral combine: Residential + Agri kind a sizeable proportion → extra weather-sensitive system general.
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SUPPLY MIX — WHERE THE MONEY IS GOING
Present state (FY26):
• Complete put in capability: ~533 GW (doubled since 2014)
• Non-fossil share: ~50% (~275 GW)
• Photo voltaic: 150 GW | Wind: 56 GW
• Coal: 222 GW | Gasoline: 20 GW | Hydro: 51 GW | Nuclear: 9 GW
CEA’s FY32 trajectory:
• Complete capability: ~821 GW (might go greater if demand surprises)
• Coal: ~272 GW |
Photo voltaic: ~295 GW |
Wind: ~97 GW |
Nuclear: 15 GW
• RE share (incl hydro): rising from 27% → 35%
Capability additions outlook:
• ~44-45 GW/yr over FY26E-32E
• vs ~19 GW/yr over final 7 years
• That’s a ~2.3x step- up
⚫ COAL — Nonetheless very a lot alive:
• ~97 GW further coal capability underneath development or deliberate by 2032
• Coal era rises from 1,250 BU (FY26E) → 1,536 BU (FY32E)
• Positioned as a reliability asset, not a progress asset
• Evening-time peaks want dispatchable capability
☀️ RENEWABLES — Largest incremental contributor:
• Photo voltaic practically doubles by FY32E
• Wind grows from 56 → 97 GW
⚛️ NUCLEAR — Bold nationwide plan:
• Nationwide goal: 100 GW by 2047
• Capex information: ~Rs200mn/MW
• Tariffs: Rs6-8/kWh underneath cost-plus RoE
• Lengthy-duration belongings (60-year life)
• Should-run standing in advantage order
🏔️ HYDRO + STORAGE:
• Hydro: 51 → 59 GW by FY32E
• Storage turning into the brand new “coal availability equal” of the final cycle
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🔋 STORAGE — THE BREAKOUT THEME
CEA’s vitality 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 keep away from peak deficit: ~10 GW by FY27E, ~11 GW by FY29E
Why it issues: Photo voltaic curtailment occasions between Could-Dec 2025 highlighted the operational problem of integrating massive RE volumes — daytime demand-supply mismatch, restricted coal ramping, transmission bottlenecks.
CEA flags threat of Planning Reserve Margin turning destructive in non-solar hours over FY27-29 if capability slips.
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🔌 TRANSMISSION — MASSIVE OPPORTUNITY
📋 Two main CEA plans body the following leg:
Plan 1 — March 2026: “Transmission Plan for 900+ GW Non-Fossil by 2035-36”
• 1,37,500 ckm of strains + 8,27,600 MVA substation capability
• Value: Rs7.93 trillion over FY27-FY36
• Focus: RE evacuation from Rajasthan, Gujarat, AP, Karnataka, Maharashtra
• Covers each ISTS and intra-state methods
Plan 2 — October 2025: “Brahmaputra Basin Hydro Evacuation Grasp Plan”
• 65GW hydro + 11GW PSP in NE
• 31,397 ckm strains + 109,935 MVA/MW capability
• Value: Rs6.43 trillion whole
• ~Rs1.9trn until 2035, Rs4.5trn past FY35
💰 Complete transmission alternative (business view): ~Rs15 trillion over the long run when combining home + Brahmaputra + worldwide interconnects.
Structure shift: From incremental community additions → system structure (765 kV, HVDC corridors, pooling stations, 1,200 kV future).
The precept: Transmission should be deliberate forward of era — line gestation is longer; delays trigger curtailment, stranded belongings, regional congestion.
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💵 POWER PRICING & MARKETS
Combined construction:
• Lengthy-term PPAs (cost-plus or lowest-bid) — bulk of provide
• Regulated tariffs
• Service provider/change markets — rising
📊 IEX day-ahead snapshot (Apr-Could 2026):
• Spot costs vary from near-zero throughout surplus photo voltaic hours → near-ceiling ranges throughout night peaks
• Huge intraday worth swings mirror the variable RE integration problem
• Headline deficits have meaningfully lowered, BUT intra-day variations persist
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DRAFT NATIONAL ELECTRICITY PLAN 2026 — KEY REFORMS
🏛️ Regulatory structure:
• Electrical energy Act 2003 = basis
• CEA = technical requirements, planning
• CERC = inter-state tariffs/transmission
• SERCs = intra-state tariffs, DISCOMs
🎯 Useful resource Adequacy as formal planning self-discipline:
• CEA: long-term nationwide demand forecasts (annual evaluation)
• SLDCs: state-level forecasts
• Useful resource Adequacy Plans at nationwide + state + DISCOM ranges
Fixing DISCOMs & industrial competitiveness:
• Well timed tariff orders (earlier than FY begin; true-up inside FY; conclude in 120 days)
• From FY27: absolutely cost-reflective tariffs, no regulatory belongings, index-linked auto- revision if delayed
• Month-to-month pass-through of energy buy prices
• Cross-subsidy discount — no tariff beneath 50% of ACoS
• Free energy needs to be averted; subsidies paid upfront
• Goal: single-digit AT&C losses
• Solarisation of agri feeders by 2030
• Professional-competition stance — reduction for giant customers (manufacturing, railways/metro)
DISCOM threat has moved from broad insolvency → extra nuanced, selective. SECI and central buildings stay essential buffers.
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CAPEX FUNDING — WHERE THE CAPITAL FLOWS
• Combine: company steadiness sheets + venture finance debt + devoted infra lenders
• Typical D:E for initiatives: 70:30 or 80:20
• Fairness from inner accruals + personal books
Vital RBI information level:
• Energy sector’s share of whole financial institution/FI capex tie-up funding jumped to 40% in FY25 (vs 24% in FY24, 20% in FY23)
• This occurred at the same time as general capex tie-ups fell — that means energy is gaining clear preferential allocation
Sectoral breakdown of financial institution/FI capex funding (FY25):
• Energy: 40%
• Roads & bridges: 9%
• Development: 6%
• Metals: 5%
• Electrical gear: 5%
• Others: 34% ━━━━━━━━━━━━━━━
🎯 KEY TRENDS TO WATCH
✅ Bullish drivers:
• Multi-vector capex visibility (uncommon in Indian energy)
• Coverage anchors offering long-duration help
• Information middle buildout creating native grid stress factors
• Storage rising as a serious new funding theme
• Transmission coming into structurally bigger funding section
• Nuclear turning into an actual alternative, not simply aspiration
⚠️ Key dangers for the sector:
• Execution slippages (transmission RoW, RE land/grid connectivity)
• Sustained unfavorable demand variability (weather-linked)
• Opposed regulatory developments
• PPA-less RE pipeline conversion failure
• Storage tariff design / bankability of storage contracts
• Enter price volatility (particularly underneath TBCB transmission tariffs)
• Vendor focus in transformers/reactors/HVDC gear
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🧭 BOTTOM LINE
India’s energy sector has shifted from a “not sufficient vitality” drawback to a “not sufficient versatile, dispatchable vitality on the proper hour” drawback.
Capital is flowing right into a parallel buildout — thermal restart, RE scale-up, transmission rebound, and the primary actual storage wave — anchored by coverage. Demand base is broader, weather- delicate, and time-of -day delicate. The following decade is about execution and structure, not mixture capability.
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