MONTHLY SPOTLIGHT

Aspiration versus Assessment: Importance of analysing coal reduction in policy and system spaces

Monthly spotlight

Ramakrishnan Atreya

Monthly Spotlight

10 July, 2026

India’s energy goals and climate aspirations over the previous decade have been ambitious. Through its Nationally Determined Contributions (NDCs) under the Paris Agreement, India committed to reduce the emissions intensity of its GDP by 45% by 2030, compared to 2005 levels (Press Information Bureau, Government of India, 2025).

In this regard, India has set high milestones, especially in its electricity mix and consumption pathways, where one of its primary goals is to reduce coal’s role in electricity generation as part of its Net Zero target of 2070.

India is also targeting 500 GW of installed electric power capacity from non-fossil sources by 2030. This commitment was made at COP26, and India crossed the 50% non-fossil installed capacity milestone in 2025, five years ahead of schedule (Press Information Bureau, Government of India, 2025). At the same time, India’s coal installed capacity share has fallen from 57% in 2018 to 47% by 2024 (Kemp, 2025).

The aims, milestones, pathways, and targets suggested in the policy landscape often encounter roadblocks, including ecosystem, economic, and external shocks.

The COVID-19 pandemic was one such shock. It created a long-lasting impact on the economy, families, health, industries, and the energy sector. It temporarily suppressed coal consumption as industrial and commercial demand collapsed. The sharp demand rebound after 2021, however, forced planners to accelerate coal capacity additions rather than reduce them.

Coal-fired generation hit a record 1,357 billion units (BU) in 2024, up 5% from 1,293 BU in 2023 (Kemp, 2025). Today, despite India crossing the 50% non-fossil installed capacity milestone, coal continues to account for over 70% of actual electricity generation (Kannan & Raj, 2026).

Recent geopolitical and supply-chain shocks, including the Gulf crisis, have again shown why energy planning assumptions must be tested under non-business-as-usual conditions. Planning assumptions may hold in stable scenarios, but coal reduction decisions must also be evaluated under demand spikes, fuel-market uncertainty, and grid-stress conditions.

India’s total power generation reached 1,845 BU in 2025-26, a continued upward trajectory driven by rising consumer and industrial demand (Press Information Bureau, Government of India, 2026). In such a context, energy security considerations cannot be separated from coal reduction decisions.

In the given global landscape, renewable penetration in electricity generation and electric vehicles on roads will remain central to India’s transition. However, meeting increasing demand while preserving reliability is the central planning challenge. Coal therefore remains not simply a fuel to be reduced, but a source of firm capacity that must be replaced only when system alternatives are available.

This article argues that coal reduction targets, without a prior assessment of system conditions, risk remaining aspirational rather than actionable. It is written for electricity system planners and explains why assessment is necessary for framing realistic outcomes. It also identifies the key system conditions that should be accounted for while planning phased coal reduction.

Coal’s dual role

India’s capacity milestone has been successful, with the country crossing the 50% non-fossil installed capacity mark in 2025. Yet coal still accounts for over 70% of actual electricity generation (Kannan & Raj, 2026). Why is this so?

Coal performs two roles in the power system. It provides electrical energy over time, measured in million units or billion units, and it also provides firm power capacity at a given moment, measured in megawatts or gigawatts. Renewable energy penetration can increasingly replace coal’s energy role as it grows. However, it does not automatically replace coal’s capacity role without storage, grid infrastructure, firm alternatives such as hydropower, gas, nuclear, and firm and dispatchable renewable energy (FDRE), or demand flexibility.

As Raj Prabhu, CEO of Mercom Capital Group, observed in a recent analysis, grid infrastructure has not kept up with India’s record pace of solar capacity addition, with transmission corridor delays, equipment shortages, and growing connection queues creating integration challenges (Kannan & Raj, 2026).

The gap, therefore, is not only infrastructural; it is also structural. The growing discourse on firm and dispatchable renewable energy reflects this. FDRE projects bundle solar, wind, and battery storage into a single contracted product designed to provide firm and dispatchable supply closer to the role currently played by coal.

According to an IISD study, the FDRE tariffs discovered by SECI stand at around Rs. 4.98-4.99/kWh, compared to new coal projects procured through competitive bidding at Rs. 5.38-6.30/kWh. Cost parity does not mean scale readiness; FDRE is projected to become competitive under market conditions by 2030 (Mani et al., 2025). This transition therefore has a structural lag.

With 217 GW of cumulative installed coal capacity in August 2025 carrying sunk fixed costs, early retirement has economic implications for DISCOMs even when newer alternatives appear cheaper on paper (Rodrigues et al., 2025).

Replacing coal’s firm capacity role is not simply a technical challenge. It carries real economic costs and system-level implications at a time when peak demand events are becoming more frequent and severe. In the energy transition, planners should therefore analyse the conditions for a coal phase-down that is not only aspirational, but also structurally feasible.

India’s Residual Load Problem

This distinction becomes visible in India’s residual load problem. India’s electricity demand and consumption patterns have been changing in recent years. According to a study by the Institute for Energy Economics and Financial Analysis (IEEFA) in 2025, India’s peak electricity demand usually occurs around 3pm during solar hours, followed by an increase between 9pm and 11pm during non-solar hours. This is attributed to rising air-conditioning loads, intensifying heatwaves, and growing industrial and commercial demand (Sachdeva Michael et al., 2025). While the solar-hour peak can be partly met by increasing renewable energy (RE) penetration, demand spikes after sunset make coal the primary residual-load carrier.

For example, on 25th April 2026, India’s power demand hit a record of 256 GW, driven by an intense heatwave (Goyal, 2026). On the same day, solar carried 34% of midday supply, with 24% solar penetration during the peak period. However, within 10 hours, thermal coverage surged back to 76% at 10:30pm (Agarwal, 2026).

On 21st May 2026, India’s power demand reached an all-time high of 270.82 GW, driven by an intense early heatwave and surging cooling loads. Power consumption in May 2026 rose 11.55% year-on-year to 164.98 BU (‘India’s Power Consumption Surges Over 11.5% in May’, 2026).

The central question is this: what is the minimum firm capacity needed to serve the residual peak load, and how much of that capacity must still come from coal? This answer would help analyse the coal reduction target as a first step. Such an assessment can then be used to measure progress against aspirational targets and to estimate the level of storage, grid flexibility, and system stability required to ensure reliable peak-demand management.

Storage Gap

The storage gap follows from the same question. Even in a business-as-usual (BAU) capacity expansion scenario, where renewable capacity continues to grow rapidly, the relevant question remains whether the system has enough firm capacity and flexibility to meet peak demand in all hours.

Battery storage is one bridge between high RE penetration and coal displacement. However, it is not the only bridge. Pumped hydro, transmission expansion, demand response, flexible thermal operation, and firm clean-energy contracts also affect how far coal can be reduced without compromising reliability.

Ember’s report on the diminishing role of coal in India’s electricity sector flags an important contrast in the data. As of August 2025, India had only 500 MWh of operational battery storage, while a substantial pipeline was in progress. According to Ember, approximately 68 GWh of BESS capacity is spread across various stages: roughly 10 GWh under construction, around 38 GWh in tendering or bidding, and about 20 GWh already awarded. However, the pipeline is not without risk; 30 tenders representing about 7.22 GWh, nearly 10% of all BESS capacity ever announced, had already been cancelled (Rodrigues et al., 2025). While the pace of growth over the last two years suggests the NEP target of 236 GWh is within reach, the gap between what is operational today and what the system needs remains the central challenge.

While India has achieved its target of 50% non-fossil installed power capacity ahead of 2030, the International Energy Agency (IEA) estimates that India will need over 230 GWh of battery storage and more than 60,000 kilometres of transmission networks dedicated to renewable integration by 2030 (International Energy Agency, 2025).

Given the rapid rise in renewable capacity, battery storage infrastructure is critical to ensuring reliable power at all times. However, the current system still requires firm capacity to meet peak demand in non-BAU scenarios. Until adequate storage, transmission, and flexibility infrastructure is available, coal will continue to support grid and system reliability. This does not mean that phased coal reduction should be abandoned. It means that its pace should be sequenced according to storage development, grid readiness, and the availability of firm alternatives.

Other structural bottlenecks

Beyond storage and firm capacity, two structural bottlenecks further affect coal reduction:

  • As RE grows and coal plant utilisation falls, fixed costs get spread over fewer units, thereby making coal more expensive per unit. While coalremains important for grid and supply reliability, this affects the finances of DISCOMs.
  • Statessuch as Bihar, Jharkhand, and West Bengal remain coal-dependent, with weaker DISCOM financials and limited RE resource quality. This means that the pace of national coal reduction is constrained by the states least prepared to transition away from coal.

These constraints point to an uncomfortable but important conclusion: coal reduction cannot be responsibly planned without analysing and agreeing on the conditions that enable each level of reduction. Battery storage at scale, grid stability and expansion, cost-competitive firm alternatives, and state-level readiness all precede the outcomes of coal reduction.

Until these conditions are assessed, system reality will not keep pace with policy targets. A realistic coal-reduction ceiling framework should not slow ambition. Rather, it should give that ambition a credible foundation and convert it into an operational pathway for planners.

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