Despite surging commodity prices, the profits of India’s largest power producer, state-owned NTPC Ltd, have grown at a faster clip as compared to its revenues in each of the last three years. The reason — getting paid for backing up the growing share of renewable power generation. In its annual general meeting Thursday, NTPC chairman and managing director Gurdeep Singh attributed this to fixed charges of thermal power plants, which he said contribute to the profitability of the state-owned power operator. Fixed charges are the payments received by thermal power generators for keeping its power plants available to generate electricity, irrespective of how much power they actually produce.This highlights a key feature of India’s changing power mix: rising renewable generation can reduce thermal power generation without reducing the payments made to thermal generators. During periods of high renewable output, particularly during the day, thermal plants are required to reduce generation or operate at lower utilisation. However, generators continue to receive fixed charges as long as the capacity remains available to the grid.While responding to queries by shareholders, Singh said the mismatch in profit and revenue growth proportion is primarily because the company’s thermal power contracts are based on plant availability rather than generation.“We generate as per the requirement of the grid. The profit comes from fixed charges,” Singh said while explaining that the company’s total revenue comprises fixed charges and energy charges, which also includes fuel costs. NTPC revenue vs profit growthThe state-owned power operator’s income fell 0.56% to Rs 1,89,798.56 crore in 2025-26 from the previous year. At the same time, however, it recorded a 15% year-on-year increase in profit after tax (PAT) to Rs 27,545.76 crore.In fact, barring 2022-23, NTPC’s profit growth has outpaced its revenue growth in each of the past three years, coinciding with a period when India significantly ramped up renewable energy capacity addition. In 2023-24, the company’s total income grew 1.79% year-on-year, while profit rose 24.6%. In 2024-25, profit grew 12.29% despite a 5.35% increase in income.Story continues below this ad NTPC financesFor discoms (distribution companies), however, the shift creates a potential cost challenge. They continue to pay capacity charges for thermal capacity regardless of how much power they actually draw from those plants. This means that a growing share of renewable energy does not necessarily eliminate the cost of maintaining thermal capacity for periods when the grid needs it.Coal flexibility to accommodate more renewable energyThe rapid expansion of renewable energy is, therefore, creating a new operating requirement for India’s coal-fired power fleet: plants must be able to reduce generation when renewable output is high and ramp up quickly when it falls. A key requirement for this transition is lowering the Minimum Technical Load (MTL) — the lowest stable generation level at which a thermal unit can operate without shutting down. Lower MTL would allow coal plants to back down further during periods of high renewable generation while remaining available to meet demand when required.Also Read | India is rapidly scaling up renewable energy. Now it needs to store itThe Central Electricity Authority (CEA) has also outlined a phased roadmap to enable coal-fired power plants to operate at 40% MTL by 2030.Story continues below this adThe move, however, faces resistance from the industry, which has flagged the risks of operating thermal units below 55% load, citing increased thermal and mechanical stress on equipment such as turbines.Cost burden on discomsWhile greater flexibility from coal plants could help accommodate more renewable energy, it does not eliminate the costs of keeping those plants available. Under the two-part tariff structure used in long-term power purchase agreements, DISCOMs pay generators fixed capacity charges irrespective of how much electricity they draw, along with variable energy charges linked to actual consumption. This creates a growing challenge for DISCOMs as the electricity mix changes. They may need thermal capacity to remain available for periods when renewable generation falls, while using less of that capacity during periods of high renewable output.Story continues below this adAlso Read | PM Modi’s 100 GW nuclear target: Why India needs more power for AI, chips and data centresA recent CEA report also flagged the financial strain caused by the widening gap between the fixed costs incurred by DISCOMs and the fixed charges they recover from consumers through electricity tariffs.While a large share of a DISCOM’s expenditure remains fixed and must be paid regardless of how much electricity is sold, the bulk of its revenue continues to depend on variable energy consumption. A DISCOM’s fixed costs include capacity payments to thermal power generators, transmission costs, employee salaries, and infrastructure maintenance. These expenses have to be paid on a lumpsum basis, irrespective of DISCOM’s energy sales. According to the report, such fixed expenses account for nearly 38% to 56% of a DISCOM’s total Annual Revenue Requirement (ARR) — the total revenue a utility is expected to recover in a financial year to meet all operational and capital expenditure obligations. Story continues below this adHowever, fixed charges collected from consumers currently contribute only around 9% to 20% of total revenues. As a result, most DISCOMs recover a significant portion of their fixed costs through variable energy charges linked to electricity consumption. The CEA said that this structure exposes DISCOMs to serious financial risks because their revenues fluctuate with electricity demand even though their major liabilities remain constant. To fix this issue, CEA also recommended redesigning retail electricity tariffs.