India’s coal revival looks impossible to achieve

By David Fickling

Almost everywhere on the planet, the great surge of coal power that fueled two centuries of industrialization is receding.

In rich countries, consumption peaked two decades ago, and has since fallen by about half. China managed to suck up every metric ton the developed world spurned since then, but that tide is now turning, too. Coal-fired power there fell about 1 per cent last year, despite a 5 per cent jump in electricity usage.

Even freezing weather in December was unable to shift the picture: Fossil generation was the lowest since 2022, in a month when demand is typically strong.

As recently as 2024, the International Energy Agency predicted Chinese coal demand would keep breaking records for the next three years. It now reckons it’s heading into decline, and will lose 180 million tons through 2030 — similar to closing all the coal power stations and blast furnaces in Japan.

There’s one remaining bright spot — India. But even there, coal’s defenses are crumbling.

Consumption will rise by about 200 million tons through 2030, according to the IEA, offsetting all the decline from China, much as China once offset the decline from rich countries.

The government is promising to build 97 gigawatts of additional coal power by 2035, nearly 50 per cent more than is currently in place. Expansions might keep going as late as 2047 under proposals currently being discussed.

There’s just one problem with all this. One of the strongest arguments for coal’s continued relevance in India in the face of cheaper, cleaner renewables — the relative ease with which it can be built — is looking badly out of date.

Take that proposed 97 GW that needs to get built over the next nine years. Just 35.5 GW of the total has received financial sign-off so far, and of that only 16.3 GW has actually broken ground. The remainder is stuck in regulatory, political or financing red tape. Some 22 GW has been abandoned.

It’s a similar picture with non-power uses, such as producing chemicals — a sector the government is trying to support with nearly 10 billion dollars in subsidies. Talcher in the eastern state of Odisha was expected to be the country’s first coal-gasification plant when completed in 2024. Instead, 11 years after it was announced, it’s still only about two-thirds built.

How long does it take to construct a coal power plant in India? Based on the 24 facilities that have broken ground and have scheduled connection dates, it’s about seven years between financial close and first power to the grid. To hit the government’s 97 GW target, that means another 60 gigawatts must get signed off in the next two years — equivalent to approving one new plant every 10 days.

That seems a stretch. Private capital is already growing wary of investing in an Indian economy that’s heavily dependent on stimulus from a debt-laden state sector, as my colleague Mihir Sharma has written. Some 80 per cent of coal plants under construction are government-owned.

It’s unlikely the government will hit its targets on new coal, SBI Capital Markets wrote this month. Solar, by contrast, should easily install 50 GW this year, SBI noted. That should put the country on track to meet Prime Minister Narendra Modi’s promise that 500 GW of clean power will be operating by 2030.

An India generating that much renewable energy won’t even need additional coal plants. Current rates of clean power build-out on their own should be sufficient to cover about 97 per cent of demand growth between now and 2030. Anything else can be met by increasing the operating rates of existing fossil generators, which are underutilized and unprofitable as a result.

We are already seeing what this will look like. Coal power fell by about 3 per cent in India last year, the Centre for Research on Energy and Clean Air, a pro-energy transition group, wrote earlier this month.

Some 44 per cent of this decline was caused by growing clean generation, with 36 per cent attributed to unusually cool, wet weather and 20 per cent from an economic slowdown. Last year represents the first time in half a century that coal generation in both China and India dropped simultaneously.

It’s too early to get out the champagne. When you’re trying to hit a peak in fossil-fuel consumption, each year is a fresh race. Power consumption in emerging economies is growing at a headlong pace, so renewables have to move at breakneck speed just to keep up.

Eating into the market share of fossil fuels is even harder. Still, renewables are proving to be more nimble than the fossil-fired incumbents at actually getting new electrons flowing.

Almost all of the increase in global emissions over the past decade came from the electricity grids of Asia’s two biggest economies. Look past the cavalcade of headlines coming out of Washington, and you can glimpse that mega-trend heading into reverse right now.