India set to see biggest jump in coal-fired power in a decade

India will add more new coal power capacity than it has in almost a decade this year, as the country rushes to deploy generation to cope with surging electricity demand.

The world's most populous nation expects to add 15.4 gigawatts in the year through March 2025, the most in nine years, said people familiar with the matter, asking not to be named as the information isn't yet public.

New Delhi is pursuing ambitious clean-power targets, but the reality of rapid economic growth has prolonged reliance on the dirtiest fossil fuel. Increasingly severe heat waves are making matters worse, pushing electricity consumption to fresh records every year. Coal still generates about three-quarters of India's electricity, and the government sees it remaining the mainstay fuel for at least another decade.

India has managed to add more than 100 gigawatts of renewables capacity over the past decade, outpacing growth in thermal power generation. However, insufficient energy storage is holding back expansion of environmentally friendly electricity.

Battery storage is still not affordable in India's competitive power market and most pumped hydro projects — an alternative storage technology — are still at a nascent stage. Other low-carbon options, such as large dams and nuclear plants are also moving at a slow pace.

India said last year that it plans to add close to 90 gigawatts of coal-fired capacity by 2032, lifting a forecast from just months before by more than half. The country has 28.5 gigawatts of coal power currently being built and more than 50 gigawatts that are planned to be awarded for construction over the next three years, according to the people.

Officials at the country's power ministry didn't immediately reply to a request for comment.

Coal keeps powering India

Built along a stretch of salt flats in southern India, the Tuticorin power plant epitomizes a quagmire for the world's fastest-growing major economy: how to provide reliable energy to 1.4 billion people.

For starters, the 1,050-megawatt coal plant, one of the region's largest, was supposed to shut down. Opened four decades ago, the facility is too cramped to install retrofits to meet the government's pollution norms, prompting India's power ministry to plan its closure by 2022. Yet the facility continues to run at full blast, clocking 90% utilization in February. Aging boilers guzzle coal from mines nearly 2,000 kilometres away — a transport distance that only adds to the nation's emissions footprint.

Electricity consumption in India is growing at the fastest rate of any major economy, driven by rising temperatures and incomes, which have pushed up sales of power-intensive appliances like air conditioners. That explosive equation has exposed the country's teetering grid. Though Prime Minister Narendra Modi has promised to rapidly build out solar and wind generation to replace polluting fossil fuels, his administration hasn't been able to keep up with demand, giving a second life to old, inefficient coal plants like the one in Tuticorin.

In recent months, Modi has green-lit a fresh wave of power station development and extended the lifespan of many existing coal assets. It's a decision that puts India at odds with global allies who're shunning the fuel on climate grounds, threatening Modi's ambitions to curb air pollution and reduce the world's third-largest share of greenhouse gas emissions.

Those dynamics will also hand the nation a crucial role in dictating the speed of the world's retreat from coal. Demand in China, currently the top consumer, probably peaked last year and the rate of future growth will increasingly be driven by India and Southeast Asia's rising economies, according to the International Energy Agency.

"The message is clear to both the international and domestic audiences: We're all in for climate actions, but India's domestic interests will take priority," said Ashwini K Swain, a fellow at Sustainable Futures Collaborative, a climate think tank in New Delhi.

India's power ministry and Tamil Nadu Generation and Distribution Corp., which runs the Tuticorin coal plant, didn't respond to requests for comment.

India has a long way to go to ensure reliable and affordable electricity. In Oct. 2021, the country was hit by a massive coal and power crisis, just as the economy began to emerge from the Covid-19 pandemic. Years of weak demand had led to sluggish growth in mining, transportation and power generation capacities.

Soon after the situation improved, officials realized the crisis wasn't a blip. Energy demand rose to a new high the following summer, causing the worst supply shortages in eight years. In 2023, even though that squeeze eased at the national level, Maharashtra, one of India's most industrialized states and home to its financial capital Mumbai, faced an alarming 10% peak deficit in August.

While shortages raised expectations that the country would accelerate the shift to green energy, India's response was exactly the opposite. Officials pushed for more mining, abandoned plans to retire old power plants, raised targets to add coal-fired electricity and successfully lobbied international forums to adopt resolutions that wouldn't hinder fossil fuel use.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.