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India’s coal-fired power generation fell by nearly 3 per cent in 2025, marking only the second decline in a full calendar year in at least half a century, according to a new analysis by the Centre for Research on Energy and Clean Air (CREA). The only previous full-year fall occurred during the Covid-19 pandemic, when electricity demand collapsed nationwide.
Unlike 2020, however, the 2025 decline was not driven by an economic shock but by structural changes in the power system. CREA’s India Power Sector Review 2025 report finds that the drop in coal and gas-based generation reflects record growth in clean electricity, milder weather that reduced cooling demand, and a longer-term slowdown in underlying power demand growth.
“India’s coal-fired power generation declined by nearly 3% in 2025, marking only the second full-year drop in at least 50 years, and the first to be driven to a significant degree by clean power growth,” CREA said in a press statement.
CREA’s analysis shows that total generation from coal and gas reversed sharply in 2025 compared with the 2019-24 trend. From 2019 to 2024, fossil-based generation had been rising by an average of 63 terawatt-hours (TWh) a year. In 2025, it instead fell by about 50 TWh — a swing of 113 TWh relative to the earlier trend.
Record growth in non-fossil electricity accounted for the largest share of this shift. Clean power generation accelerated from an average annual increase of 22 TWh during 2019-2024 to 71 TWh in 2025, accounting for 44 per cent of the decline in coal and gas generation. Renewable energy output rose 22 per cent year-on-year in 2025, while large hydropower generation increased by 15 per cent.
Weather effects were also significant. Milder temperatures reduced air-conditioning demand, cutting electricity growth by an estimated 41 TWh compared with a scenario of constant temperatures. This explained 36 per cent of the drop in fossil generation. The remaining 20 per cent was due to a broader, non-weather-related slowdown in electricity demand growth that began in late 2023, CREA said.
“Temperature-adjusted analysis indicates that the slowdown in electricity demand growth began in late 2023. Heatwaves in 2024 temporarily masked this trend by boosting cooling demand, but once temperatures normalised in 2025, the underlying deceleration became clear,” the organisation noted.
The findings also challenge the rationale for continued coal capacity expansion on the grounds of meeting peak demand. On India’s highest-demand day in 2025 — 12 June — peak load reached about 242 GW, yet only 216 GW of thermal capacity was online. Around 26 GW of coal and gas capacity remained offline due to maintenance and outages, while solar, hydro, and other renewables helped meet demand comfortably.
Solar generation alone contributed up to 60 GW during daytime peak hours, easing pressure on thermal plants. CREA found that even non-solar-hour peaks remained well within the capability of existing coal capacity, especially when combined with hydro and other dispatchable sources.
“Clean electricity sources are also increasingly covering demand peaks, making coal power capacity additions redundant,” the report said.
CREA argues that India’s long-term targets further limit the case for new coal generation. Meeting the government’s goal of 500 GW of non-fossil capacity by 2030 would be sufficient to absorb expected growth in electricity demand, even if demand accelerates in the second half of the decade.
Based on Central Electricity Authority projections, sustaining annual renewable additions of around 50 GW would leave “no headroom for coal-based power generation to grow between now and 2030,” the report said. While coal-fired capacity is projected to keep rising, coal generation is expected to remain broadly flat or decline, pushing plant load factors steadily lower.
The analysis warns that completing all coal projects currently under construction — about 36 GW — could worsen overcapacity in the sector. If these plants come online, coal plant utilisation could fall to “unprecedented lows,” increasing financial stress for generators and raising costs for consumers.
Under long-term power purchase agreements, coal plants are paid fixed capacity charges regardless of how much electricity they generate. As utilisation falls, these fixed costs are spread over fewer units of electricity, increasing the overall burden on power users while creating a growing pool of underutilised assets.
“India’s power-sector challenge is no longer one of capacity adequacy, but of system flexibility,” said Manoj Kumar, India Analyst at CREA. “Lowering the minimum technical load of coal plants, rapidly scaling battery storage, and strengthening transmission networks are now essential to integrate rising renewable generation and avoid risking investments in new coal capacity.”
With renewable capacity already accounting for about 40 per cent of India’s installed power mix and a large pipeline of solar, wind and storage projects under development, CREA concludes that the priority for policymakers should shift decisively from adding new coal plants to making the grid more flexible — and cheaper — in a power system increasingly dominated by clean energy.