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New analysis finds India’s record-breaking solar additions are accelerating the decline of coal power.
Coal plants face falling utilisation rates, higher fixed costs and increasing operational strain.
States begin piloting storage, flexible procurement and new tariff models to manage a renewable-heavy grid.
Report warns India is entering a delicate transition phase, requiring rapid regulatory and market reforms.
India’s renewable energy sector is expanding at an unprecedented pace, putting coal power under mounting economic pressure and reducing its role in the country’s electricity mix, according to new analysis from energy think tank Ember and Climate Trends.
As delegates gather at 30th Conference of Parties (COP30) to the United Nations Framework Convention on Climate Change in Belém, Brazil to chart a global pathway for last year’s historic COP28 pledge to transition away from fossil fuels, the report warns that record-breaking solar additions are creating a more complex balancing act for grid operators and state utilities, who must now juggle flexibility, cost and reliability.
India added 25 gigawatts (GW) of solar capacity in 2024, with a further 25 GW installed by October 2025. Much of this surge has been driven by developers racing to benefit from an expiring inter-state transmission system (ISTS) waiver. The gradual withdrawal of the waiver from July 2025, coupled with competitive auctions and a strong project pipeline, has entrenched renewables as India’s fastest-growing source of power.
But this rapid growth is transforming how coal is used. The average plant load factor (PLF) of coal stations has fallen to around 66 per cent and could drop to 55 per cent by FY32 if India follows the renewable and storage expansion outlined in the National Electricity Plan. Coal plants — long built for steady baseload output — are increasingly being asked to ramp up and down to manage solar-heavy afternoons and evening peaks.
The shift brings major challenges. India currently has under 1 gigawatt-hour (GWh) of operational battery storage, forcing several states to rely on coal procurement to meet peak demand. This push-and-pull has complicated long-term planning, with coal and renewables now effectively competing for the same demand, rather than complementing each other.
The financial pressure on distribution companies is also growing. Many remain locked into multi-decade coal power purchase agreements (PPAs), leaving them with high fixed charges for plants that may operate for less than half the year. Ember’s analysis shows that coal power costing Rs 4.78/kWh at normal utilisation can rise to about Rs 6/kWh once underuse is factored in, as fixed costs are spread across fewer units of electricity.
New coal capacity offers little respite. Recent bids point to sharply rising fixed costs, driven by costlier ultra-supercritical technologies, more stringent emission controls and the need for flexibility upgrades. Some developers are reportedly front-loading these fixed costs to stay competitive on energy charges, potentially increasing long-term costs for buyers.
Even so, the report notes that states are beginning to trial solutions. Gujarat, Rajasthan and Madhya Pradesh are experimenting with more flexible procurement models. Gujarat has signed a PPA with THDC for variable-speed pumped storage; Rajasthan has secured record-low tariffs for standalone battery energy storage systems; and Madhya Pradesh has tendered an innovative solar-plus-storage system capable of ensuring 95 per cent availability across both daytime and peak periods.
States are also exploring shorter PPAs and three-part tariff structures that reward performance during high-demand or stressed hours, rather than simply paying for capacity and aligning incentives with a renewable-rich grid.
The report cautions that India is entering a sensitive phase of its energy transition. The end goal, a reliable, low-cost, renewable-heavy power system, is clearly within sight, but reaching it will require managing operational friction, overhauling market design and rethinking long-standing planning assumptions.
Still, the direction of travel is unmistakable. Renewable energy is rapidly overtaking coal. But this is not taking place through policy mandates, but through cost competitiveness and deployment speed, the report found. The challenge for policymakers is to ensure that grid, regulatory and procurement reforms keep pace with a sector undergoing a profound transformation.