Coal’s diminishing role in India’s electricity transition
Growing solar and wind to lower coal generation and push up its tariffs, making renewables with storage optimal for cost-effective, reliable power
29 Oct 2025
33 Minutes Read
Table of Contents
Executive summary
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1
India’s power generation capacity additions
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Supporting materials
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Highlights
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No new coal projects would be required beyond what is already under construction
55%
Average coal PLF by FY 2031–32, reduced from ~69% in FY 2024–25 as coal shifts from baseload to flexible balancing.
25%
Increase in effective coal cost due to lower PLFs, part-load operations, and higher O&M.
Executive summary
Coal is becoming uneconomical as India’s electricity transition gathers pace
India’s power system is entering a new phase of transition. As renewables and storage gain a bigger share of the country’s generation mix, coal’s role is changing to a flexible balancing resource from being a baseload provider. Its new role makes coal-based power costlier while firm and dispatchable renewable options become more cost-competitive. In such a scenario, building coal capacity beyond the existing targets of the National Electricity Plan (NEP) 2032 targets is no longer economical for the country.
India is broadly on track to meet the NEP-2032 generation-mix targets for solar, coal and hydro. Wind targets require higher annual growth rates. For storage, the country needs rapid expansion in both pumped-storage hydropower (PSP) and battery energy storage systems (BESS), which appears feasible. The only technology likely to miss the target is nuclear.
As the generation mix changes, coal is likely to go from being the pillar of the power system and its baseload provider to a flexible balancing resource that supports growing variable renewable energy. This change has profound implications for its cost-competitiveness. By the fiscal year (FY) 2031-32, our analysis finds that coal-based electricity will be roughly 25% costlier than FY 2024-25.
Using a chronological, least-cost operations model of the Indian power sector (PyPSA-India), we compare how the coal fleet operates today (FY 2024–25) versus FY 2031-32, under the NEP scenario. The analysis shows that in FY 2031-32, the power system will need coal plants far less than in FY 2024-25 during the day. The higher solar in the system will mean coal plants will need to operate closer to their minimum technical limits. The fleet will routinely swing by 70–80 gigawatts (GW) between morning and midday, operating with only ~7 GW of headroom above its technical minimum.
This increasing flexibility requirement is what will keep making coal-based electricity costlier. As Plant Load Factors (PLFs) fall to around 55%, fixed costs will spread over fewer units of generation, driving up the effective cost of coal power. Additional part-load inefficiencies, higher auxiliary consumption, and retrofit needs will further raise generation costs — together leading to the aforementioned 25% rise in the effective tariff of coal-based electricity.
By contrast, firm and dispatchable renewable energy (FDRE) options — renewable energy coupled with battery storage — are becoming increasingly competitive, with tariffs between INR 4.3–5.8/kilowatt-hour (kWh) and proven ability to meet availability and performance obligations. India can now achieve reliability and flexibility without resorting to new coal builds.
India’s next phase of power sector planning should focus on enhancing system flexibility through storage, operational reforms, and selective retrofits, rather than expanding coal capacity. Doing so will not only align with NEP-2032 objectives but also ensure a more economically efficient, resilient, and sustainable power system.
The grid batteries of today look nothing like the grid batteries of even just 12 months ago. Their lifetime now runs into decades, they are mostly plug-and-play so can be installed quickly and easily, the fire risk is all-but eliminated, and the latest sodium ion batteries use zero critical minerals. Already India’s auctions are incorporating more hours of battery, and ultimately batteries will work with solar to make 24/365 electricity. There’s no reason why India can’t copy its success from solar manufacturing to become self-sufficient in battery manufacturing, and so energising India with home-grown solar and battery.
Dave Jones
Chief Analyst, Ember
Chief Analyst, Ember
Key takeaways
01
No new coal beyond current pipeline needed if renewable targets are met
India can meet its 2032 power needs without adding coal beyond the ~35 GW already under construction. If renewable energy and storage targets are delivered, the existing coal pipeline is sufficient for reliability and peak coverage. Results indicate that ~10% of additional coal units would be entirely unutilised by FY 2031–32, while ~25% of the fleet would be heavily under-utilised—further evidence that new coal beyond the current pipeline is neither necessary nor economical.
02
Renewables with storage are emerging as more cost-effective options
New coal plants in India are increasingly uneconomic, with tariffs nearing INR 6/kWh (USD 68/MWh)—higher than that of Firm and Dispatchable Renewable Energy at INR 4.3–5.8/kWh (USD 49–67/MWh) and solar-plus-storage at INR 2.9–3.6/kWh (USD 33–41/MWh). With falling utilisation pushing costs higher, thermal power is no longer even close to the least-cost option for dispatchable power.
03
Policy focus should shift toward flexibility and storage
Rather than expanding coal capacity, India should prioritise accelerating storage deployment, retrofitting select thermal plants for deeper flexibility and strengthening dispatch and reserve frameworks to support renewable integration at least cost.
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