Subscribe
Rajasthan’s power regulator has rejected a proposal for 3,200 MW of new coal capacity, citing lack of justification under national and state energy plans.
RERC noted rising renewable energy curtailment and warned that adding inflexible coal would worsen grid and cost pressures.
Updated CEA projections sharply reduced the need for new thermal capacity, and recent nuclear and thermal allocations further strengthened Rajasthan’s supply position.
Stakeholders highlighted that RE plus storage is significantly cheaper than new coal, offering major savings for consumers.
The order urges a shift towards shorter PPAs and flexible procurement to avoid long-term fossil fuel lock-ins.
The Rajasthan Electricity Regulatory Commission (RERC) rejected Rajasthan Urja Vikas and IT Services Ltd’s (RUVITL) proposal to build 3,200 megawatts (MW) of new coal-based capacity in an order dated November 18, 2025, ruling that the developer had failed to provide any technical or policy justification that could supersede the Central Electricity Authority’s (CEA) Resource Adequacy Study 2025 or the state’s Clean Energy Policy 2024.
RUVITL had petitioned for new coal-based firm power as essential to meet the state’s rising energy demand and manage grid frequency. However, the RERC found these claims insufficient. It noted that Rajasthan already faces significant renewable energy (RE) curtailment during daytime hours, and that adding inflexible coal capacity would not only exacerbate the issue but also prove economically unviable due to the high tariff costs of building plants far from coal mines.
Furthermore, the RERC’s detailed order highlighted the excessive cost of the proposed thermal power vis-à-vis alternative RE solutions along with battery energy storage system (BESS). Additionally, it directed RUVITL to explore the emerging trend of short-term peak power purchase agreements (PPA). This approach, the regulator noted, would allow the state to meet high-load demand without locking consumers into expensive, long-term fixed charge liabilities for the next 25 years.
In 2023, the CEA established a Resource Adequacy Framework to help states plan for sufficient, cost-effective capacity to meet future demand. Under this framework, resource adequacy plans (RAP) were issued for each state, extending through 2035-36.
Initially, the RAP 2024 projected that Rajasthan would require an additional thermal capacity of 3,246 MW by 2031-32 to ensure long-term system reliability. This projection aligned with the state’s steady demand growth, with energy needs expected to rise by 5.3 per cent annually and peak demand by 4.5 per cent annually between 2023-24 and 2031-32.
However, the landscape shifted in August 2025, when the CEA issued a revised RAP. This update, covering the period up to 2035-36, drastically reduced the projected requirement for additional thermal capacity to just 1,905 MW by 2035-36 — a 40 per cent reduction — with no new addition for 2031-32. This shift completely undercuts the rationale for 3,200 MW of new coal.
Further weakening the case for new coal was the commissioning of major projects between the filing of the original petition and the final hearing. The Prime Minister inaugurated the 2,800 MW Banswara Nuclear Power Project and the 2,400 MW Nabinagar Thermal Power Plant, with Rajasthan’s allocated capacity from the projects totalling 2,400 MW. This provides round-the-clock firm power to the state, exceeding the predictions made in the RAP.
Additionally, RUVITL has already contracted 1,950 MW of lignite- and gas-based power, along with 6,630 MW of Firm Dispatchable Renewable Energy (FDRE), to come online by 2030-31 through various memoranda of understanding and PPAs. The RERC noted that RUVITL had failed to furnish information regarding these existing contracts to the CEA before floating the tender for the new 3,200 MW coal plant.
Elaborating on the aspect of underdeveloped reasoning while floating of tender, Maria Chirayil, senior research associate, Prayas (Energy Group) stated that with the increasing penetration of RE, new coal-based capacity is likely to be only suitable to serve non-solar peak demand in the medium term.
“But even in the medium term, alternative sources of power such as FDRE and RE + storage will be increasingly viable with lower risk of lock-ins. Shorter gestation period of the alternative fuels mean, we decide on their capacity addition with greater cost discovery at later yet more opportune moments. This will avoid premature financial burden on distribution companies (discom),” she said.
The Supreme Court of India, in the BSES Rajdhani Power Ltd. vs Union of India judgment dated August 6, 2025, emphasised the need to safeguard consumer interest in all decisions of the RERC. In paragraph 30 of the judgment, the court mandated that tariff determination must adopt commercial principles, encourage competition, and promote efficiency to protect consumers.
The tender floated by RUVITL stipulated that the new 3,200 MW plant must be built in state itself. Given that coal mines are primarily centred in the central and eastern parts of India, this location raised the final power tariff by 15 to 20 per cent. The RERC noted that locating the plant closer to the coal source, in states like Chhattisgarh, would provide substantial savings on coal transportation (around Rs 3,800 per tonne). This geographic penalty alone translates to an estimated Rs 2,264 crore in annual savings that the discom would forgo. Furthermore, placing the associated grid infrastructure within Rajasthan added additional capital expenditure for the state exchequer.
Cost estimates suggest that building new coal power currently costs around Rs 11.5 crore per MW. Due to the geographical coal travel, the final tariff for the new unit was projected to reach approximately Rs 7 per kilowatt hour.
The largest financial argument against the coal plant came from the comparison with BESS, which can provide similar firm power needs for the grid.
This disparity, highlighted by stakeholder submissions, showed that opting for alternatives such as storage can result in Rs 2,200 crore in savings for the consumer while still meeting the requirement for firm power.
Alexander Hogeveen Rutter, manager, electricity sector lead at Third Derivative and a stakeholder participant during the public hearing, said the time when new coal and new BESS were competitive is long past. “The cost savings of RE + Storage vs new coal works out to nearly Rs 4,500 per year per connection in Rajasthan, which is a massive win for consumers. On top of this, storage can be built modularly, in as little as three months, and has much faster ramp rates. Coal is not only much more expensive, it is much less reliable than the alternatives,” he stated
The rejection of the 3,200 MW proposal rests heavily on its failure to conform with state and national policy directives, as mandated by the RERC (Power Purchase & Procurement Process of Distribution Licensees) Regulations, 2004.
Rajasthan’s Clean Energy Policy (CEP) 2024 draws upon the National Electricity Plan 2023. The CEP fundamentally emphasises that BESSs are essential to address RE intermittency, ensuring grid stability and reducing dependence on conventional fossil fuels. Accordingly, the state is mandated to actively promote ESS through simplified regulatory processes and financial incentives.
The RERC’s recent notification of virtual net metering and group net metering on October 13, 2025, is considered RE-friendly and expected to promote distributed renewable energy generation across the state. In addition, the Commission has provided rebates in applicable charges for BESS, and almost all open access-related charges have been exempted for domestic consumers. The government’s plan to maximise solar generation by shifting agricultural load to daytime hours is also in the works.
Besides, the order states that it is the obligation of RUVITL to address RE curtailment, which is high in Rajasthan, and not compound the issue in the future. Taken together, these measures will further depress thermal plant load factors, making new coal financially unviable.
A granular modelling analysis of Rajasthan’s power system in 2030 showed RE + Storage will ensure reliable power to consumers, with lower costs, and is in the best interest of already financially stressed discoms, stated Disha Agarwal, senior programme lead, Council on Energy, Environment and Water. “The RERC’s public hearing process and evaluation of this proposal is commendable; with the process running over 10 months, the Commission allowed regular representations, noting all evidence and ensuring timely responses to participants,” she said.
Rajasthan is recognised as a RE-rich state, and with solar generation being ramped up year on year, the state is expected to remain power-surplus during daytime hours.
The decision serves as an indictment of traditional long-term PPAs extending up to 25 years. The RERC stated that these commitments restrict discoms from adopting newer, more efficient renewable energy technologies as they evolve. Even when a unit is under-utilised, especially during high-solar daytime operations, the discom remains liable for fixed charges based on the plant’s availability. The RERC also noted the lack of flexibility in operation of the new units as floated in the tender, limiting the scope for mitigating under-utilisation of the unit in the future.
Instead, the RERC suggested a transition to shorter-tenure PPAs — for instance, 10 to 12 years — to maintain financial and technological flexibility. Furthermore, the RAP 2025 recommended a shift towards Medium-Term Open Access and Short-Term Open Access arrangements in the range of 1,500 MW to 6,000 MW in different years to address seasonal and peak-period requirements through market purchases or bilateral contracts.
However, the overhaul of the power ecosystem is fraught with complexity. Anuja Tiwari, senior partner at AZB & Partners, noted: “The challenge for transition from long-term arrangements to shorter PPAs will be to ensure the continuity of stable, affordable power to meet energy demands. RERC and other energy regulatory commissions will have to bring discoms on board in earnest for a short-term PPA framework to take off, while avoiding disruption of existing PPAs.”
The RERC order arrives at a crucial juncture for India. While the country’s energy requirements are rising with its growing economy, coal power continues to dominate the generation mix, accounting for 70 per cent in 2024-25. This makes the RERC’s detailed rejection a momentous decision for India’s future energy transition.
The order offers a clear blueprint for regulators across the country. Nivit Kumar Yadav, programme director at Delhi-based think tank the Centre for Science and Environment noted: “Other state electricity regulatory commissions should take note of RERC’s detailed assessment on cancellation of the additional coal power in the state. We have been advocating for revision of PPAs and their shorter tenure consistently. New coal power must be flexible, efficient and complement RE for the country going ahead.”
The focus is clearly shifting from inflexible baseload coal to responsive, need-based solutions. The Central Electricity Regulatory Commission has already notified regulations for battery storage, and the CEA’s long-term plan recognises the expansion of BESS as the critical environmental solution. The RERC order sets a new benchmark for other state regulators facing similar pressure to expand thermal capacity. The decision serves as an early, strong signal that economic and policy realities demand a transition towards flexibility in coal operations.