India is poised for a significant shift in its energy landscape, with a recent report from energy think tank Ember indicating that the country does not need to increase its coal power capacity beyond the targets set in the National Electricity Plan (NEP) for 2032. This conclusion is based on the growing economic viability and reliability of renewable energy sources, particularly solar and wind power, when paired with battery storage.
The analysis highlights a potential economic downside to exceeding current coal capacity plans. By the fiscal year 2031-32, if India successfully meets its NEP targets for renewable energy and storage, it is projected that approximately 10% of additional coal units planned from FY 2024-25 could remain entirely unutilized. Furthermore, nearly 25% of the existing coal fleet is expected to be significantly underutilized during the same period.
This reduced operational efficiency is predicted to drive up the cost of coal-based electricity by as much as 25% between FY 2024-25 and FY 2031-32. The increase in costs is attributed to factors such as lower utilization rates, which elevate fixed costs, and the inefficiencies associated with running plants at partial capacity, including higher auxiliary consumption and the need for retrofits.
Neshwin Rodrigues, Senior Energy Analyst at Ember and the report’s author, emphasized this transition, stating, “India’s power system is entering a new phase of transition. As renewables gain a bigger share of the country’s generation mix and storage becomes cheaper, coal’s role diminishes. Building coal beyond the current pipeline is neither necessary nor economical for the country.”
The report underscores the increasing competitiveness of renewable energy sources combined with battery storage. With tariffs falling within the range of ₹4.3–5.8/kWh (USD 49-67/MWh), and with proven capabilities in meeting performance obligations, these technologies offer a reliable and flexible alternative to new coal builds.
Improvements in battery technology and the success of large-scale auctions have been key drivers behind this trend. Dave Jones, Ember’s Chief Analyst, noted the long lifespan of grid-scale batteries and the environmental benefits of newer technologies like sodium-ion batteries, which use no critical minerals. He expressed optimism about India’s potential to lead in battery manufacturing, mirroring its success in solar power production, to achieve energy self-sufficiency.
This assessment comes as India has already made significant strides in its energy transition. Earlier this year, the country surpassed its target of generating 50% of its power capacity from non-fossil fuel sources, achieving a crucial goal under the Paris Agreement five years ahead of schedule.
While the Ministry of Power has acknowledged the importance of energy security and has prioritized thermal capacity addition to meet growing demand, recent developments suggest a re-evaluation of future coal needs may be warranted. India currently has 217 GW of thermal capacity (coal and lignite), with additional capacity under construction and in various stages of planning.