Clean Energy Growth Cuts India’s Coal Power Generation by 3% in 2025: Report
The report projected that sustaining annual clean energy additions of around 50 GW is sufficient to absorb incremental electricity demand over the remainder of the decade. Photo: Pixabay
By Editorial Team | January 8, 2026
With peak demand met without the full coal fleet, the report warns that new coal projects could raise costs while remaining underutilised
A new report found that India’s coal-fired power generation declined by nearly 3% in 2025, marking only the second full-year drop in at least 50 years. The report by the Centre for Research on Energy and Clean Air (CREA) said that it is the first to be driven to a significant degree by clean power growth.
While the first fall in coal-fired power generation came after the Covid-19-related decline in power demand in 2020, the drop in 2025 was driven primarily by record growth in clean power, which accounted for 44% of the decline, alongside lower air-conditioning demand due to milder weather and a longer-term slowdown in electricity demand growth compared with the 2019–24 trend, as per the report.
Demand peak comfortably met with renewable sources
The report said that on India’s peak demand day in 2025, June 12, peak demand of 242.5 GW was met with only 215.9 GW of thermal capacity online, leaving around 26 GW of capacity offline due to maintenance and outages. Despite this, demand was comfortably met through solar, hydro, and other renewable sources, showing that even extreme peaks can be managed without deploying the full coal fleet. Peak demand during non-solar hours also remained well within the capability of existing thermal capacity.
The report also mentioned that temperature-driven demand primarily from air-conditioning, showed a decline of 9.8% in 2025 compared with the previous year, which reduced demand growth by 2 percentage points. If temperatures had remained comparable to last year, total electricity demand would have grown by an estimated 3.3% instead of 1.3%. The report said it showed that while weather effects contributed to the slowdown, they were not the dominant driver.
According to the report, the slowdown in electricity began in late 2023. The heatwaves of 2024 temporarily elevated cooling loads and made demand appear stronger than it was, masking the emerging slowdown. When temperatures normalised, the underlying trend became evident, the report stated. Thus, the slowdown in India’s electricity demand started earlier for long-lasting reasons, and the 2024 heat spikes briefly masked it.
The report projected that sustaining annual clean energy additions of around 50 GW, as required to meet the government’s 500 GW non-fossil capacity target by 2030, is sufficient to absorb incremental electricity demand over the remainder of the decade. The report said that clean electricity sources are also increasingly covering demand peaks, making coal power capacity additions redundant.
Completing coal projects risks power user capacity burden
The report also warned that if approximately 36 GW of under-construction coal power projects are completed, combined with the current capacity and stressed capacity of another 22 GW, total coal capacity would rise to roughly 278 GW. This would surpass the projected demand of 252 GW by 2030-2031. Furthermore, if all these plants were to come online simultaneously, it would significantly reduce the plant-load factor (PLF) across the existing fleet.
The report explained that even as the PLF falls and coal plants operate for fewer hours, they will still receive fixed capacity payments under long-term power purchase agreements (PPAs). These contracts primarily provide payments for maintaining available capacity rather than guaranteeing actual electricity generation. Consequently, adding new units would increase the total fixed-cost burden while leaving a substantial portion of coal capacity underutilised.
“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.”