India’s power sector is undergoing a rapid transformation especially Thermal power segment (thought by many as a dying segment). The government is aggressively pivoting to a “Thermal + Battery Energy Storage System (BESS)” hybrid model to meet surging electricity demand, driven largely by the explosive growth of artificial intelligence (AI) infrastructure.
This concise report evaluates the regulatory shifts, supply chain developments, and corporate strategies driving this multi-year capex cycle.
Executive Summary: The ValuePickr Perspective
The thermal power sector has shifted from a “dying industry” to the indispensable backbone of India’s 24/7 grid.
The “Baseload” Reality Check: With peak demand crossing 245 GW, intermittent solar and wind cannot support the country’s grid. India is now racing to add 80 to 97 GW of new thermal capacity by 2035.
The Supply Chain Fix: Domestic builders like BHEL and L&T are clogged with orders. To prevent delays, the government relaxed import restrictions on Chinese power equipment, protecting project margins and timelines.
The “Game-Changer” Regulation: Recent CERC draft regulations allow power companies to install massive batteries (BESS) at coal plants, offering guaranteed 14% returns. This makes coal plants highly profitable “Round-the-Clock” energy hubs.
Some important observations regarding revival of Thermal power segment
1. The Macro Catalyst: AI Data Centers (MW to GW)
Insights from ABB India’s recent earnings call provide the underlying catalyst for this power overhaul: Data centers are rapidly moving from Megawatt (MW) to Gigawatt (GW) capacities.
Because AI training models require immense computing power, they demand “Five Nines” (99.999%) reliability. A gigawatt-scale facility cannot tolerate a millisecond of power fluctuation. Intermittent renewables cannot provide this alone, making heavy-duty thermal baseload the only immediately viable solution to electrify the AI boom.
2. The Regulatory Goldmine: CERC’s BESS Framework
To incentivize storage and protect thermal generators from the influx of “cheap daytime solar,” the Central Electricity Regulatory Commission (CERC) introduced a transformative tariff framework for BESS integrated into thermal plants:
Guaranteed Returns: Operators earn a guaranteed 14% Return on Equity (ROE) and a 2% annual maintenance fee on the battery assets.
The Efficiency Bonus: The government set an 85% round-trip efficiency threshold. Generators earn a 25 paise/kWh cash bonus for energy discharged above this mark.
Profit Sharing: Plants can use unrequisitioned coal power to charge batteries during the day and sell it on the open market during evening peaks, splitting the net gains 50:50 with the DISCOMs.
This completely neutralizes the threat of solar power, turning battery storage into a cash-generating, risk-free asset for companies like NTPC.
3. Unblocking the Supply Chain: Chinese BTG Imports
Building the required 307 GW of total thermal capacity by 2034-35 requires a flawless supply chain for Boiler, Turbine, and Generator (BTG) equipment. Recognizing that domestic manufacturers are overwhelmed, the government recently relaxed the 2020 curbs on Chinese power equipment imports for state-run entities. This tactical reversal ensures that PSUs can bypass domestic bottlenecks, avoid cost overruns, and commission plants on schedule.
4. The Return of the Private Sector
The market is aggressively pricing in this thermal revival. Larsen & Toubro (L&T) reported that the private sector’s share in its domestic order book surged from 21% in March 2025 to 36% in December 2025, driven heavily by thermal power and storage traction.
The sheer volume of this capex cycle was highlighted by Simplex Castings management, who noted:
“Adani has ordered 16 thermal power plants. NTPC has ordered 22… For the next 6 years, it’s a huge market. Each thermal power plant can keep us busy… for all the four years.”
Conclusion
The narrative that coal is a dying asset is fundamentally flawed in the Indian context. Driven by the terrifying energy demands of gigawatt-scale AI data centers and the necessity of 24/7 grid stability, the government is engineering a highly lucrative environment for Thermal + BESS integration. By removing Chinese supply chain friction, subsidizing battery deployments, and guaranteeing exceptional regulatory returns, legacy thermal plants are being transformed into the indispensable, high-yield energy hubs of the future.