King Coal keeps its crown, with 100 GW more of thermal projects on way

Despite the boom in solar and wind power, electricity from thermal and hydro projects remains critical. Every electricity grid must have a minimum, constant level of power demand called base load, which is typically supplied by coal and hydro projects given their stable output.

"Now, the government is looking at the possibility of adding over 100 GW of thermal capacity. The roadmap is still under consideration. But the vision is to use the vast reserves of domestic coal for power generation and ensure economic growth and adequate base load capacity," one of the two people cited above said on the condition of anonymity.

Demand growth

India's peak power demand has been rising year after year. It is projected to reach 270 GW in 2025, crossing the previous high of 250 GW on 30 May, 2024. The Central Electricity Authority (CEA) expects power demand to hit 446 GW by 2030 and cross 700 GW by 2047.

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Alongside, coal production has jumped. India produced a record 1 billion tonne of coal in FY25, and expects to continue the growth momentum, with the country projected to produce 1.5 billion tonne of the mineral by 2030 and the peak rated capacity at 2 billion tonne.

According to the second person, the coal ministry would explore ways to raise production further, and provide the power ministry with an estimate of coal availability in the years ahead. Both coal and power ministries are working on this front, the person added.

Queries mailed to the ministries of power and coal remained unanswered.

"Energy transition roadmap in India would be different from rest of the world, primarily from the developed countries. India's energy demand is growing at 6-7% annually, while it has peaked out in several other economies. Further, the per capita energy consumption in FY23 was about 1330 kWh (kilowatt hour) in India, about half of the global average of around 2700 kWh and it is growing at a fast pace. Developed economies have a per capita energy consumption of around 13,000-15,000 kWh. Also, the addition of renewable energy capacity would be far higher than the planned thermal capacity, so green transition would continue at a much higher pace. The push for thermal would not slow down the transition," said Anujesh Dwivedi, partner, Deloitte India.

Base load basics

India needs to urgently enhance base load power to ensure that installed renewable capacity can be fully utilized, said Davindar Sandhu, co-founder & managing director at Primus Partners, a management consulting firm, calling the rethink "rooted in energy security, economic growth, and grid stability." He noted that while renewable energy capacity is expanding rapidly, it remains intermittent, with a reduced share in the overall electricity mix, making a stable base load critical.

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"This expansion will safeguard against blackouts and maintain grid frequency, even as renewables like solar and wind are integrated in greater proportions. India remains committed to renewable energy, but a pragmatic approach ensures that the green transition does not compromise growth," Sandhu said.

If the base load is not met, it can lead to a loss of grid frequency, rendering it unstable. In such cases, distributors resort to load shedding to keep the grid stable. On Monday, Spain and Portugal witnessed countrywide blackouts after a grid collapse, believed to have been triggered by a failure in Spain's renewable-focused projects. Spain is one of Europe's largest producers of renewable energy.

Green drive, coal fuel

India's drive for coal-fired power would run parallel to its plan to achieve 500 GW non-fossil capacity by the end of this decade. The move underscores the nation's continued reliance on coal despite the boom in clean energy, and comes in the backdrop of concerns regarding reliability of large-scale renewable power, and import dependence in the case of critical minerals for green energy. India's power generation relies heavily on its coal reserves, the fourth-largest in the world, with the country being the second-largest coal producer in the world.

Of late, the government has emphasized on the need to continue coal-based plants and add capacity, along with the ongoing transition. The Economic Survey argued against shutting coal plants and called for climate adaptation, rather than mitigation.

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“There is no valid economic rationale for shutting down coal plants in India, leaving huge investments underutilized and stranded and without a dependable alternative in place. The US and European countries may transition from coal to natural gas because they have access to that resource, and their older conventional coal-based thermal plants are nearing the end of their life cycle," the Survey said. It noted that unlike many developed countries, India's only reliable energy source is coal, as it possesses around 10% of the world's coal reserves but only 0.7% of the world’s natural gas reserves, another source for thermal power capacity.

Business opportunity

The move towards more coal power capacity also opens a business opportunity for boiler makers and power sector EPC (engineering, procurement and construction) companies like state-run Bharat Heavy Electricals Ltd (Bhel). However, it also poses a challenge given the company's limited production capacity. Bhel and General Electric are the major suppliers of boilers to thermal power plants in the country. Bhel, which has reported 19% growth in revenue backed by power sector orders, has its order books full for boilers and EPC contracts.

According to Sabyasachi Majumdar, senior director at CareEdge Rating, there are only a few boiler, turbine, and generator (BTG) manufacturers and EPC contractors for thermal power plants in the country, thus there would be some capacity constraints. "But, the growth in economic activity, increasing use of AI, growing data centres and electric vehicles will lead to much higher power demand. Also, a large growing country like India cannot totally give away fossil fuel sources for energy. Base load capacity like coal and nuclear will be required at least for a decade or two. A plan to add more coal-based capacity is required although green power sources would see a continued growth. The requirement large patch of lands for solar and wind projects and storage facilities like battery also is a factor for requiring more thermal power capacity," Majumdar said.

And read | India stocking up coal for high power demand, aims 50 mn tn inventory at plants by April

Since the government decided to add 80 GW of thermal capacity by FY32, Bhel, which has struggled to get power equipment contracts for about three years before FY24, has witnessed a revival in orders for boilers and EPC and faces a capacity constraint, as reported by Mint in October last year. The company, which had not received any orders in the thermal space from August 2019 to September 2022, is now getting orders and enquiries even from private companies for the purchase of BTG goods.

Further, the thermal capacity addition in FY25 slowed down amid factors including supply constraints, right of way issues, delays in commissioning and land acquisition. Data from the Central Electricity Authority showed that capacity addition of thermal power generation projects in the country slowed down about 32% during the first 11 months of FY25. As of February FY25, about 3.9 GW of thermal capacity was installed, compared to 5.7 GW in the same period of the previous fiscal.