Adding new coal power capacity beyond the targets outlined in India’s National Electricity Plan (NEP) 2032 is neither necessary nor economically viable, according to a study published by energy think tank Ember. The analysis, based on a least-cost operations model, shows that if India achieves its planned additions in solar, wind and storage, new thermal units commissioned from the fiscal year (FY) 2024-25 onward would be largely redundant in the national power mix.
Underutilisation across the coal fleet
Ember’s projections indicate that 10% of new coal units would remain unused by FY 2031-32, while approximately 25% of the fleet would operate at very low capacity. Average plant load factors (PLFs) for coal-fired power plants are expected to decline from 69% in FY 2024-25 to 55% in FY 2031-32. This reduction in utilisation would increase fixed costs per megawatt-hour (MWh), compounded by higher auxiliary consumption, inefficiencies from part-load operations, and growing retrofit requirements.
Coal would shift from being a baseload source to a balancing resource, requiring large daily ramping variations between 70 and 80 gigawatts (GW), operating close to technical minimums. These dynamics make coal power more complex and expensive to integrate into Power Purchase Agreements (PPAs).
Rising unit costs and stranded asset risk
This transition would raise the cost of coal-fired electricity by an estimated 25% between FY 2024-25 and FY 2031-32. In states like Bihar and Madhya Pradesh, which are located near coal mines, recent coal power tariffs have already surpassed INR 6/kWh ($68/MWh) and INR 5.85/kWh ($66/MWh) respectively. Ember notes that effective tariffs could rise to INR 7.25/kWh ($83/MWh) once adjusted for lower actual utilisation.
Poorly dispatched plants under long-term capacity payment contracts pose a growing stranded asset risk. The report recommends enhancing reserve and dispatch systems, retrofitting select thermal plants for flexibility, and accelerating storage deployment to minimise unnecessary system costs.
Firm renewables with storage emerge as viable alternative
Firm and dispatchable renewable energy (FDRE) solutions, combining solar or wind with battery storage, are increasingly competitive for providing flexibility. These solutions are priced between INR 4.3 and INR 5.8/kWh ($49–67/MWh), with proven contractual performance in meeting grid reliability standards.
The shift is further supported by advances in utility-scale battery technology, particularly sodium-ion batteries that avoid the use of critical minerals. With operational lifespans spanning decades, such technologies present a viable pathway to reinforce India’s grid resilience without building new coal capacity.
