Paradox of India's energy transition - Coal phase out or renewables phase in!

Time of India

23-05-2025

India's energy transition presents a stark paradox. India crossed 220 GW of renewable energy (RE) capacity in March 2025. Simultaneously, coal output crossed the milestone of 1 billion tonnes for FY2024-25, with 88% usage by the power sector. The Ministry of Power also announced last year to add almost 90 GW of new coal-fired capacity through 2032, increasing an earlier target by more than 60%. This dual trajectory, accelerating RE capacity alongside growing coal output, highlights a deeper structural challenge. Despite record RE addition of 28 GW last year, coal accounts for 70% of India's electricity generation.
While India ranks among the largest consumers of electricity in absolute terms, its per capita consumption remains low at around 1,330 kWh per year, roughly one-third of the global average. This underscores a dual challenge: a vast growing population, and significant inequalities in reliable electricity access and consumption. Ensuring universal, affordable, and stable electricity supply to meet the increasing demand remains a central priority, complicating the pace and nature of coal phase-down.
Three critical dimensions explain why an immediate coal exit is not viable for India.
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Economics of Substitution: Beyond Price Tags
First, while the RE generation cost is falling, price alone cannot drive a large-scale shift from coal. Solar and wind are cheaper when the sun shines or the wind blows. However, recent tenders for round-the-clock (RTC) renewable power or studies undertaken for flat block solar and storage, designed to mimic coal's 24/7 stable supply, have revealed tariffs of approximately ?4.5 - ?5 per kWh, comparable to coal-based electricity. Furthermore, there are incentives like the waiver of interstate transmission system charges. This waiver expires in June 2025, and its removal could erode renewable's cost edge. Coal prices, in contrast, are distorted by subsidies and levies. Moreover, railway freight charges on coal indirectly subsidise passenger fares.
Technical Limits and Infrastructure Gaps
Second, technical and infrastructural limitations continue to constrain the integration of RE into India's power system. Despite the installed RE capacity crossing 220 GW, the actual generation paints a more sobering picture: the share of renewables has hovered around
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22%–24% in recent years. This mismatch underscores a critical systemic challenge: while capacity is expanding, the actual generation and dispatch of variable RE remains limited.
Furthermore, the International Energy Agency observes that as the share of variable renewables increases, electricity prices often rise due to added costs for grid balancing, backup storage, and transmission infrastructure. RE's variability inherently needs other sources to act as balancing supply increasing the prices. India already bears one of the highest electricity tariffs when measured in purchasing power parity terms and additional costs could strain customers.
The Socio-Economic Role of Coal
Third, India's coal transition must be gradual, inclusive, and just. It is not merely a climate policy imperative but a socio-economic necessity. India's state-owned enterprises, along with private players, collectively employ around 5 lakh workers across the sector particularly in some of India's economically vulnerable states. A hasty coal phase-out could disrupt these regional economies and deepen existing inequalities leading to a social crisis.
Strategic Steps for a Balanced Transition
The Central Electricity Authority estimates that coal's share in India's installed capacity will decline from the current around 47% to 33% by 2029-30. However, it will still contribute approximately 54% of total generation, largely due to its critical role in meeting baseload demand. India is a fast-growing economy, which needs to be fuelled. Even with aggressive RE deployment, this scale may not be achievable without coal in the interim.
This raises a fundamental question: Are we ready to fully shift from coal, or is a phased transition the more responsible path? Rather than a coal phase-out, India should pursue a strategy that includes meeting the growing demand using the best available option as well as phase in renewables. The strategy can include retiring aging coal plants, focussing on high-efficiency low-emission coal technologies for new builds, and allowing plants to operate through their technical life spans. Simultaneously, scaling up RTC and hybrid renewables, investing in grid modernisation, energy storage, and advancing clean, firm power sources such as nuclear are crucial. Deployment of technologies like carbon dioxide removal, and emission control systems, can help reduce the environmental burden. The Need for Balance, Not Binary Choices
India's electricity demand will continue to rise. The question is how best to meet the demand. At present, coal remains an unavoidable part of the solution. The world must recognize that India's energy transition is not about abrupt shifts but a balanced, strategic evolution. As cleaner technologies become cost-effective, coal's role will decline, not due to ideology, but due to economics and stability. To realize the vision of Viksit Bharat by 2047, India must manage this transition with deliberate, inclusive, and evidence-based planning.
(Dr. Debajit Palit is Centre Head and Dr. Tanvi Khurana is Research Associate at Centre for Climate Change & Energy Transition, Chintan Research Foundation. Views are personal)