India's power sector set for strong FY27 growth on rising demand, capacity additions

India's power sector is expected to stay charged through FY27 as surging electricity demand, record peak power consumption and continued capacity additions fuel growth, a report by 360 ONE Capital said.The brokerage said that electricity consumption is expected to remain resilient as industrial and commercial activity gathers pace, creating favourable conditions for power utilities. Companies with fuel-secure thermal assets alongside growing renewable portfolios are likely to be better placed to deliver sustained earnings growth.India consumed nearly 485 billion units of electricity during the April-June 2026 quarter, up around 8 per cent from a year earlier. Peak power demand climbed to 270.82 GW in May, with the report attributing the increase to extreme heatwave conditions, a delayed onset of the monsoon and higher cooling requirements. Short-term electricity trading also picked up during the quarter. Volumes traded on the Indian Energy Exchange rose nearly 16 per cent year-on-year in the first quarter of FY27, indicating greater dependence on exchange-based markets during periods of supply tightness.Even as renewable energy continues to expand rapidly, thermal power is expected to remain central to India's electricity mix. The report said the country's energy strategy will continue to rely on both sources, with coal-fired plants providing dependable base-load power."Coal remains the backbone of India's electricity system, contributing ~70% of total power generation and providing dependable base-load power," the report said, adding that this dependence is unlikely to change materially over the coming decade given strong demand growth and the need for round-the-clock power.India's installed power generation capacity crossed 548 GW by June 30, 2026, with non-fossil fuel sources accounting for around 54 per cent of the total. During the quarter alone, the country added 16.8 GW of fresh capacity, including 13.2 GW from renewable sources, 2.9 GW from coal-based thermal projects and 650 MW from hydropower.Power generation also registered broad-based growth during the quarter. Total generation increased 8 per cent year-on-year, while renewable generation expanded by 21 per cent. Thermal generation grew 7 per cent over the same period.Looking ahead, 360 ONE Capital said the sector's outlook for FY27 remains positive. Energy security priorities and the possibility of an El Nino impact could support thermal power demand, while capacity additions are expected to strengthen utility performance.The brokerage expects improved generation and new capacity to support earnings for several utilities, although it cautioned that higher interest and depreciation costs could affect some renewable-focused companies in the near term. It added that coal inventory levels and the pace of project execution will remain key factors to watch, while rising electricity demand, renewable expansion, thermal additions and storage development are expected to underpin the sector's long-term growth.Get the latest Business News and Live updates. Download the TOI app.