India's Power Sector: Balancing Investment and Risk

India’s power sector is witnessing rapid expansion, with electricity demand expected to grow significantly. A report by Motilal Oswal estimates an investment opportunity of ₹40 trillion over the next decade. However, Aequitas Research raises concerns about overinvestment in the sector without proper power purchase agreements (PPAs), which could pose financial risks.

Growing Demand for Power

• Urbanization and Industrial Growth: Electricity consumption is projected to increase at 7% per year due to expanding cities and industries.

• Technological Advancements: The rise of electric vehicles (EVs) and data centers will drive significant energy consumption by 2035.

• Renewable Energy Transition: India targets 500 GW of renewable energy by 2030, creating opportunities in solar and wind power.

Key Investment Areas

• Renewable Energy Projects: Solar and wind energy offer long-term investment potential.

• Power Transmission Infrastructure: Enhancing transmission networks is essential for efficient power distribution.

• EV Charging Infrastructure: A nationwide EV charging network will be crucial for supporting the shift to electric mobility.

Risks of Overinvestment

Aequitas Research highlights that large-scale investments without firm PPAs could result in underutilized assets and financial losses. Key risks include:

• Lack of guaranteed buyers: Excess power generation without purchase commitments can lead to stranded assets.

• Mismatch between supply and demand: Poor planning may cause oversupply, affecting project profitability.

• Regulatory uncertainties: Shifts in government policies could impact long-term returns on investment.