Despite global shifts towards carbon transition, India is set to maintain coal as a cornerstone of its electricity generation for the next 8-10 years. According to Moody’s Ratings, the country plans to add 40-50 GW of coal-based capacity over the next five to six years to meet its escalating power demands. This expansion underscores the importance of coal in India’s energy strategy even as the world moves towards greener alternatives.
Moody’s predicts that India’s power demand will increase by 5-6% annually during this period. To meet this rising demand, the utilization rate for coal-based power capacity is expected to remain high, between 65-70%, despite the addition of new capacity. This highlights coal’s ongoing role as a reliable power source, crucial for sustaining India’s economic growth and energy needs.
While the Asia Pacific power markets are transitioning towards lower carbon emissions, with thermal generation including coal, oil, and gas still dominating the power supply, this trend is expected to continue for at least the next three years. These conventional sources remain vital in supporting the region’s growing power requirements.
In parallel, India is making significant strides in expanding its renewable energy capacity. In fiscal year 2024, the country increased the share of renewable energy in its fuel mix to approximately 43%, thanks to strong policy support. This balanced approach aims to integrate more green energy sources while still relying on coal to ensure energy security.
Government support is critical for India to achieve its ambitious climate targets for 2030 and 2070. The Central Electricity Regulatory Commission’s tariff regulations for 2024-29 play a key role by guaranteeing returns and cost pass-through mechanisms for distribution companies. This regulatory framework ensures a stable environment for investments in both coal and renewable energy projects, facilitating a balanced growth trajectory for India’s energy sector.
Moody’s analysis underscores the dual strategy of leveraging coal’s reliability while ramping up renewable energy efforts. This approach positions India to navigate the complexities of energy transition, ensuring both immediate power availability and long-term sustainability.
