India Is Turning Back to Coal. Is the Power System Running Out of Alternatives?

 

BIZ MASALA  |  BUSINESS • MARKETS • PEOPLE • INSIGHT

India Is Turning Back to Coal. Is the Power System Running Out of Alternatives?

Demand is rising faster than the grid can comfortably manage. The paradox: India is curtailing renewable electricity even as coal plants face pressure to keep the lights on.

By Murthy ASR  |  13 October 2026

Hero image: AI-generated editorial illustration contrasting coal-fired generation, solar power and transmission infrastructure; not a photograph of a specific plant.

A coal expansion debate has returned—because demand has changed

India’s power planners are confronting an uncomfortable question: how much more coal-fired capacity will the country need while it adds renewable energy at a record pace? On 13 October, Central Electricity Authority chairperson Ghanshyam Prasad said the additional coal capacity required beyond the previously discussed plan could rise to 105 GW—or even 150 GW—as electricity demand grows. The earlier plan had envisaged adding 97 GW to take coal capacity to 307 GW by 2035. These are planning estimates, not a final approved construction order. [1]

The immediate pressure is visible in the numbers. Peak electricity demand reached 270 GW in July 2026, around 18% above the same quarter a year earlier, according to the Centre for Research on Energy and Clean Air (CREA). September power shortages rose to 560 million kilowatt-hours, the highest since August 2023, while coal-fired generation increased 13.3% year on year and hydropower output fell about 20%. [1][2]

The coal debate is not simply a contest between fossil fuels and renewables. It is a question of timing, reliability, storage, transmission, fuel supply and the ability to deliver electricity at the hour it is needed.

The paradox: clean electricity was available—and some went unused

In July and August, India curtailed approximately 1.8 billion units of renewable electricity because grid and operational constraints prevented all the available power from being absorbed. That was about 4.2% of solar generation in those two months, according to CREA data reported by Reuters. In April–June, government data cited in the same report showed 14% of solar output was held back. [2]

This is the central contradiction: a country can face tight power supplies while wasting some electricity it has already generated. Solar power is abundant during daylight, but demand also peaks after sunset. Without enough transmission, flexible generation, pumped storage and batteries, surplus power in one place or hour cannot automatically solve a shortage somewhere else or later.

Source: CREA, Quarterly Energy Snapshot for India, Q2 FY2026–27. Rounded generation figures; this chart shows energy generated, not installed capacity.

Coal remains the backbone—but its supply chain is under strain

CREA’s Q2 FY2026–27 snapshot says coal and lignite supplied about 351 billion units, roughly 66% of total generation, during the quarter. Non-fossil generation—including renewables, hydropower and nuclear—reached a record 177 billion units. Solar generation rose 39% year on year, while hydropower fell 20%. [3]

Yet coal availability itself became a constraint. By 1 October, 85 power plants had coal stocks below 25% of their normative requirement, CREA reported. Coal consumption remained around 79 million tonnes a month from June through September, while dispatch to power plants fell from 74 million tonnes in May to 66 million tonnes in August. [3]

Expanding coal capacity alone does not guarantee energy security. New units require dependable mining, evacuation and rail logistics, adequate stocks, water, maintenance and financing. If fuel delivery cannot keep up with consumption, the system can have more installed capacity without a matching increase in dependable output.

What the numbers tell us

Indicator	Latest reported figure	Why it matters
Peak demand	270 GW in July 2026	Demand is rising quickly.
September energy shortage	560 million kWh	A supply gap emerged despite higher generation.
Coal & lignite generation	351 billion units in Q2 FY2026–27	Coal remains central to the current mix.
Non-fossil generation	177 billion units in Q2 FY2026–27	Non-fossil sources are expanding.
Renewable electricity curtailed	About 1.8 billion units in July–August	Grid constraints can waste clean power.
Plants with critically low coal stocks	85 plants on 1 October	Fuel security is a near-term reliability issue.

Does India need more coal—or a more flexible power system?

The evidence supports a more precise question than ‘coal or renewables’. India needs dependable electricity at all hours, and its options are not interchangeable. Coal can provide dispatchable power but brings fuel, pollution, water and emissions costs. Solar and wind can add large amounts of low-operating-cost energy, but their output varies with weather and time. Hydropower can provide flexibility but is exposed to rainfall. Storage and transmission can shift and move clean electricity, but must be built and paid for.

The CEA’s estimate of 105–150 GW of additional coal capacity should be treated as a warning about projected demand and reliability, not proof that every proposed coal project is necessary. A credible plan would publish the assumptions behind demand forecasts, retirements, storage deployment, transmission completion, fuel availability and plant utilisation, and test whether alternatives can deliver the same reliability at lower total system cost.

The policy risk runs in both directions. Underbuilding firm capacity can raise outage and price risks. Overbuilding coal can lock capital into long-lived assets that may operate less often as renewables, storage and grid flexibility improve. The answer depends on transparent modelling and execution—not slogans.

The hidden investment story: transmission and storage

India’s renewable build-out has moved quickly, but the wires and flexibility needed to use that power have not always kept pace. Transmission can move electricity from resource-rich regions to demand centres. Batteries can respond quickly to short-duration peaks; pumped-storage hydropower can store energy for longer periods where projects are feasible. Demand response, better forecasting and market design can also help align consumption with available supply.

These investments are less visible than a new power station, but the curtailment figures show why they matter. If clean power is generated but cannot be delivered when and where it is needed, India pays for capacity without receiving its full value.

Who pays—and who benefits?

Consumers need reliable power at an affordable price. Industrial users need predictable supply and may face higher costs when shortages force expensive market purchases or captive generation. Power producers need fuel, grid access and contracts that make investment financeable. Taxpayers and electricity customers may ultimately bear costs of subsidies, stranded assets or emergency procurement, depending on how the system is structured.

A transparent energy plan should disclose not just gigawatts announced, but also expected cost per unit delivered, fuel-security assumptions, emissions implications, storage and transmission milestones, and who bears the risk if demand or technology evolves differently from forecasts.

The bottom line

India’s return to coal is not evidence that its renewable transition has stopped. It is evidence that adding generation capacity is easier than building a power system that can deliver reliable electricity around the clock. The immediate priority is to close gaps in firm supply, coal logistics, transmission and storage together. The strategic test is whether India can meet rising demand without turning today’s reliability problem into tomorrow’s expensive, inflexible power system.

Sources and editorial notes

·       [1] Business Standard, 13 October 2026, “India may need to raise coal power capacity as demand surges: CEA chief.” https://www.business-standard.com/industry/news/india-may-need-to-raise-coal-power-capacity-as-demand-surges-126101300581_1.html

·       [2] Reuters, 12 October 2026, “India wastes 4% of solar power amid power shortages in July, August, report shows.” https://www.reuters.com/business/energy/india-wastes-4-solar-power-amid-power-shortages-july-august-report-shows-2026-10-12/

·       [3] Centre for Research on Energy and Clean Air (CREA), “Quarterly energy snapshot for India: Q2 2026–27.” https://energyandcleanair.org/quarterly-energy-snapshot-for-india-q2-2026-27/

·       [4] Press Information Bureau, Ministry of Power, power supply position and measures to meet demand, March 2026. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2246901&lang=2&reg=48

Editorial note: Capacity estimates are attributed to the CEA chairperson as reported by Business Standard; they are not a final government order. Generation and curtailment figures refer to stated periods and sources. The hero image is AI-generated editorial illustration, not an actual power station photograph. This article is analysis, not investment advice.