India’s energy landscape is witnessing a significant pivot as coal remains firmly at the center of its power generation strategy. The Central Electricity Authority has reported that the country added 4 GW of coal-fired power generation capacity this year, mirroring last year’s figures and marking the highest level of new installations since 2019. This trend is not just a blip on the radar; it signals a robust commitment to coal as a primary energy source, even as the world grapples with climate change and a push toward renewable energy.
The Indian government has ambitious plans, aiming to add up to 90 GW of new coal-fired capacity by 2032 to meet the surging demand for electricity. However, officials are candid about the challenges, acknowledging that the current pace of new installations is lagging behind this target. As it stands, India operates around 215 GW of coal-fired generation capacity and relies on coal for more than 70% of its electricity needs. This puts India in the spotlight as the second-largest consumer of coal globally, trailing only China.
The recent mandate issued by government officials to power plants using imported coal to operate at full capacity for at least the next two months underscores the urgency of the situation. This measure extends an emergency clause first introduced during the summer, highlighting the government’s proactive approach to ensure that electricity supply remains stable amidst fluctuating demand and supply dynamics. With prices for imported coal dipping compared to last year, operators like Vedanta, Tata Power, and Adani Power, who manage about 16 GW of capacity, are positioned to take advantage of this window.
The International Energy Agency (IEA) recently reported that global coal usage has hit an all-time high, expected to reach a staggering 8.77 billion tonnes this year, with projections indicating that this trend will persist at least through 2027. Against this backdrop, India is ramping up its domestic coal production, with officials expressing a clear intent to bolster output to keep pace with the growing demand. Rupinder Brar, Additional Secretary in the coal ministry, articulated the sentiment: “the demand [for coal] is extremely important. And we do see demand growing in India considering the growing size of the economy … therefore, coal will also definitely be required.”
Furthermore, Deloitte India forecasts that production of thermal coal will grow at a rate of at least 8% annually in the coming years, driven primarily by the power generation sector. The country’s coal production hit nearly 998 million tonnes this past year, marking a nearly 12% increase from the previous year.
The looming question is how this coal-centric approach will shape India’s energy future. The government’s plan to launch a coal exchange market by 2025 could introduce a new layer of flexibility and efficiency in coal trading, potentially mitigating some of the supply chain challenges that have historically plagued the sector. With coal firmly entrenched in India’s energy strategy, the challenge will be balancing economic growth with environmental sustainability. As the country navigates this complex landscape, the decisions made today will undoubtedly resonate for years to come, defining the trajectory of its energy sector amidst a global shift towards greener alternatives.
