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Why Coal Continues to Rule the Grid

India celebrates its renewable milestones, but towns like Jharsuguda tell another story. With blackouts feared, storage scarce and alternatives faltering, the country still backs the black rock as clean-power promises collide with the stubborn reality of intermittence

Coal-fired thermal power plants remain a major source of sulphur and particulate emissions in India
Summary
  • Despite rising renewable capacity, coal still generates most of India’s power due to its reliability and round-the-clock availability.

  • Solar and wind remain inconsistent, while storage solutions like batteries are yet to scale.

  • Transmission bottlenecks and financing hurdles slow renewable integration into the grid.

  • With nuclear, hydro, and gas options limited, India continues adding coal capacity to ensure energy security.

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On a sticky evening in Jharsuguda, a coal town in western Odisha, the air is heavy with soot. Freight trains loaded with black rock crawl across the horizon, feeding the power plants that line the river. Their chimneys send up columns of smoke that drift into a sky already dimmed by the monsoon. In the workers’ quarters nearby, ceiling fans whir tirelessly, powered by the same furnaces that coat the town in dust. Children do their homework by the light of bulbs burning on coal. The paradox is impossible to miss: the same mineral that keeps India’s homes lit also pollutes its air and clogs its lungs.

It is here, far from the air-conditioned conference halls of Delhi where grand plans for solar parks and green hydrogen projects are unveiled with fanfare, that India’s energy truth reveals itself. Despite the remarkable rise of renewables, coal remains the country’s mainstay, and will be for decades to come.

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The illusion of capacity

In July this year India achieved half of its installed electricity capacity from non-fossil fuel sources, well ahead of the 2030 target set under its Nationally Determined Contributions (NDCs). The country’s total installed capacity has now increased to 242.8 GW from 76.37 GW in March 2014.

But capacity is not the same as generation. In FY23, excluding oil and gas imports, 79% of India’s domestically produced energy came from coal and lignite. “If we remove hydro and nuclear, renewables contributed just 3.8% of the total energy produced,” said Alok Kumar, Former Power Secretary.

This dissonance between capacity and actual generation lies at the heart of India’s transition. On paper, renewable installations soar; in the field, coal continues to do the heavy lifting. Despite achieving the 50% capacity milestone, India now plans to increase its coal and lignite-based thermal power capacity from 80 GW to 97 GW by 2034–35. According to the International Energy Agency (IEA), the black rock will continue to dominate India’s energy mix in the coming decades, with an expected net addition of 60 GW by 2030.

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“Recent global disruptions such as blackouts in some countries have forced us to rethink how far we can depend exclusively on renewables,” cautioned Central Electricity Authority (CEA) Chairperson Ghanshyam Prasad at a recent energy forum. He emphasised that ensuring reliable power during non-solar hours remains a major challenge. The problem is not that the sun and wind do not shine or blow; it is that they do so intermittently, and the grid cannot yet cope.

Because of their inherent intermittency, renewables work in tandem with conventional sources like coal, which continues to provide a stable baseline.

“The need for thermal-based electricity will remain essential to meet demand during non-renewable energy (non-RE) hours. This can effectively address the imbalance between thermal power generation and installed renewable capacity,” the MNRE Secretary Santosh Sarangi told Outlook Business.

Storage, the natural solution to intermittency, has yet to catch up with rapidly expanding renewables. India’s installed capacity for Battery Energy Storage Systems (BESS) is just 204.5 MW, with a target of 74 GW by 2031–32. “Batteries haven’t scaled up in India in line with solar installations,” said Nikhil Nahar, Co-founder of SolarSquare. “Solar only took off after its prices dropped sharply, batteries will follow a similar trajectory.”

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The contrast with China is stark. Beijing has poured money into both renewables and backup. It now boasts over 58 GW of nuclear capacity — more than six times India’s — and has already deployed over 20 GW of grid-scale batteries and vast pumped hydro schemes. Even as it added more renewable capacity than the rest of the world combined last year, it also built more coal plants than anyone else. India’s predicament, then, is hardly unique. But with the ecosystem needed to support alternatives lagging, coal is hard to dislodge.

Coal’s operational advantage

Coal-fired power plants are, therefore, the bedrock of the grid, providing 24/7 electricity that underpins critical infrastructure and keeps energy flowing reliably to households and industry. They can also ramp up output to meet sudden peaks in demand, such as evenings when solar power is not available. Without the stability of coal, renewables are a risky bet.

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Furthermore, affordability, abundant reserves and high PLF (Plant Load Factor) make coal the most reliable source. In FY 2023–24, coal power plants operated at an average PLF of 68%, whereas renewables were only at 20–30%.

Union Power Minister Manohar Lal Khattar acknowledged the challenge in his recent media briefing, stating that India’s peak power demand is projected to touch 458 GW by 2032 — far exceeding the supply from green sources — and therefore “the country will need to continue investing in coal projects at least until 2035.”

But coal’s true price goes beyond power bills. Despite vast domestic reserves, India still buys the mineral from Australia, Indonesia and South Africa, swelling its import bill and exposing its economy to supply chain risks in a volatile global marketplace. Subsidies to state-run Discoms deepen the fiscal burden, while the health toll is crushing: the World Health Organisation estimates that coal-related air pollution contributes to hundreds of thousands of premature deaths each year in India. The haze in Jharsuguda is not an anomaly; it is a symptom of a national emergency.

Transmission & grid challenges

Although the pace of renewable capacity addition is impressive, the misalignment between generation and evacuation represents a serious bottleneck, leading to lost generation potential and underutilised assets.

According to the recent report Transmission expansion trails renewable energy growth in India by IEEFA and JMK Research, “In FY2025, 8,830 circuit kilometres (ckm) of new transmission lines were commissioned against a target of 15,253 ckm, representing a 42% gap, with Inter-State Transmission System (ISTS) additions at their lowest in a decade.”

Despite increased private sector participation under Tariff-Based Competitive Bidding, India’s overall transmission expansion has been slow and remains below National Electricity Policy targets. Annual transmission line additions have fallen short of planned levels since FY2019, with only FY2021 surpassing expectations.

“The transmission infrastructure is just not keeping pace with renewable energy growth. In order to evacuate renewable energy capacity in time, we need to move beyond traditional methods of granting approvals,” says Vishal Tripathi, Former Public Policy Expert at NITI Aayog.

Developers also point to financing challenges, procurement restrictions, and a thicket of multi-agency approvals. Long-term contracts for storage are scarce, and domestic manufacturing of key equipment is still nascent. India’s Production Linked Incentive (PLI) schemes for solar modules and advanced batteries may ease these constraints over time. For now, investors and utilities alike continue to see coal as the safer bet.

Alternatives are not ready yet

Nuclear power is often seen as the cleanest alternative to coal for grid stability.  However, due to high upfront costs, long-term waste storage issues and public scepticism mean India has managed to install only 8.8 GW of nuclear capacity. By comparison, China already has 58 GW. The global total stands at around 376 GW, with the United States, France, Russia, South Korea and Japan accounting for the bulk.

Hydropower, another potential alternative, faces delays due to geological, environmental and regulatory issues. It requires massive upfront investment, while the rise of cheaper solar and wind has reduced its economic feasibility. “Can we increase hydropower to meet incremental demand at a higher rate? Perhaps not, as hydropower is constrained by the availability of suitable sites,” said Charith Konda, Energy Specialist at IEEFA.

Gas, widely used as a balancing fuel elsewhere, is scarce and expensive in India, further narrowing the set of options to replace coal.

An uneasy transition

India’s energy transition is undeniably under way, but coal continues to anchor the grid. New coal capacity is still being added, largely because alternative baseload options remain limited. Battery storage is not yet commercial at scale, much of the gas fleet is stranded, and nuclear and hydro remain constrained.

Blackouts in Spain and Portugal earlier this year, when renewables spiked but backup failed, offer a cautionary tale. Germany too, long Europe’s green standard-bearer, extended the life of its coal plants during the 2022 gas shock.

“Renewables must be built out aggressively, but adequate amounts of coal and gas are still needed as balancing options,” said Gauri, Energy Expert at S&P. The challenge is not to abruptly exit coal, but to manage a balanced transition by maximising renewable integration, investing in storage, modernising transmission, and enabling gas, hydro and nuclear to play larger roles.

This contradiction is mirrored on the world stage. India argues forcefully at climate summits that rich countries must cut faster and finance transitions in the developing world. Yet at home, it is committing to new coal projects until 2035. With COP30 in Brazil approaching, the optics matter. Unless India demonstrates progress on storage, transmission and baseload alternatives, its climate credibility could be tested.

For now, the smokestacks of Jharsuguda tell the story. India’s transition is uneven, halting and riddled with bottlenecks. Coal remains dirty, costly in health and fiscal terms, but indispensable. That reliability — not ideology or climate promises — explains why coal still rules India’s grid. The paradox of a nation trumpeting green milestones while doubling down on black rock may be uncomfortable. But in the balance between keeping the lights on and saving the planet, India’s policymakers have made their choice.

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