States Ink New Coal Power Deals Amid India's Rising Energy Demand

• States bid for 7GW coal power; 17GW contracted since Aug '24.
• Demand surge, storage delays drive coal reliance to 2040s.
• Targets: 307GW coal by '35, 500GW non-fossil by '30.

Electricity distribution firms in India are entering into long-term agreements with coal-powered electricity generators to meet a predicted spike in demand during the evening hours, the result of increased consumption of air conditioning in the evening, as there are delays in introducing battery storage. This is in the context of national initiatives to expand clean energy generation that might delay decarbonizing the world's third-largest emitter of greenhouse gases.

The most populous state, Uttar Pradesh, along with Assam, which recently eliminated any incentives for renewable energy generation, intend to enter into contracts for at least 7 GW of coal-powered generation within a period of two months for an anticipated online date of 2030.

This comes after a period of over 17 GW of coal capacity that was contracted in the 16 months to July 2025, representing the greatest pipeline of contracted capacity since COVID-19, according to India Ratings & Research. Other states, such as Madhya Pradesh, Tamil Nadu, and Bihar, have also pursued coal projects, citing delays with renewable energy generation.

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The issue is driven by grid instability from renewable variability and insufficient storage; while India has auctioned 12.8 GWh of battery capacity, only 219 MWh is operational. Uttar Pradesh Energy Department official Narendra Bhooshan points out, "You cannot fill the base load gap with renewables alone."

Expenditure already includes Adani Power's $5 billion expenditure on two new coal plants, and Torrent Power is already valuating a potential 5-7 GW of investment over the next ten years. India's longer-term plans are to increase coal capacity from 210 GW to 307 GW by 2035, while attempting to hit 500 GW of non-fossil fuel by 2030 from just 251.4 GW.

 Analysts, including Wood Mackenzie's Ashis Kumar Pradhan, predict the peak generation of coal to be pushed into the early 2040s and the way it expands is reliant on thermal capacity also expanding. Although solar is cheaper during the day, when new coal capacity is added, the cost of coal is still comparatively lower than renewable+storage options, according to expert Alexander Hogveen Rutter, as battery technology scales.