India is designing investment programmes for storage and transmission upgrades and modernisation so that large amounts of renewables can reach end-users through the grid. Storage increases the ‘on-demand availability’ of renewable energy, making it comparable to the reliability of thermal power but without the greenhouse gas emissions. Complementary investments in storage and grid upgrades, and further renewable energy generation capacity, will help to manage India’s exit from a coal-dominant electricity generation mix in the next 5–10 years. The target is to double today’s 250 GW of renewable energy by 2030, by tendering for 50 GW every year.   

Universal electrification was only achieved in 2019. Electricity demand is increasing by 100 TWh/y (see also this week’s companion article Delivering the energy transition in India: what's happening on the demand side). Therefore, India needs to expand electricity generation from all sources.   

Electricity demand in India continues to outpace capacity addition, from new loads such as data centres, artificial intelligence training models, electrification of transport, air-conditioning necessitated by extreme heatwaves, and the like. As clean energy typically has very low running costs once it is in place, policymakers have given it preference and procured large stand-alone amounts since 2018.  

More coal power plants were also built when renewable energy fell short of satisfying incremental demand growth. However, Indian policymakers have realised that feeding increasing amounts of stand-alone green energy plants into a traditional grid is creating grid instability and increasing the risk of widespread blackouts, which they want to avoid. Grid constraints have forced curtailment (and revenue losses) of renewables supplied by private generators in renewable-leading states such as Tamil Nadu (wind) and Rajasthan (solar).   

India’s current priority is to improve delivery of available clean energy to end-users by increasing the capacity to store and transit more through the grid. This may take another 5–10 years to complete. The private sector is already being asked to devise storage solutions to provide ‘round the clock’ renewable energy.  

Coal  

Even though half of installed capacity is renewable energy, coal still accounts for 73–75% of power supply on peak days. Surging demand cannot be satisfied with intermittent renewables sources. Solar generation capacity has also surged, but it does not meet demand during the evening hours. Day-and-night heatwaves, changed demand and weather patterns are creating a daily dual peak that stresses the power system unless coal plants are also used for peaking.   

While studying how to mobilise funding for the renewable energy storage and grid requirements, India has increased its installed thermal generation capacity to a five-year high. According to the Central Electricity Authority, 4 GW of coal-fired capacity was added in 2023 and 2024. Further, the Ministry of Power in 2023 announced plans to add up to 90 GW of coal-fired capacity in the decade through 2032. Coal demand in India is expected to peak in the late 2040s.   

Employment considerations also affect the exit from coal. Around 4–13 million jobs depend on coal mining and thermal power, mostly in low-income eastern states. A just transition needs to be carefully designed and funded.

India’s poor and densely populated coal-bearing states in the east have limited renewable energy penetration because energy expenditures of households are minimal. Solar irradiation is also lower in the east than in richer and more developed western and southern states of India. Distribution utilities are financially weaker, and these states are less preferred and less lucrative investment destinations for renewable energy investors.   

Fig 1: As of May 2025, India had 475 GW of electricity generation capacity installed  

Source: Central Electricity Authority

Moving away from coal 

The exit from coal in India will succeed when the country achieves firm and dispatchable renewable energy (FDRE) by using affordable storage. This has started, through innovative tendering for co-located, hybrid wind-solar capacity with storage. Night-time wind and daytime solar hybrid generation complement each other by increasing joint capacity utilisation factor, reducing the amount of external storage needed.   

Tendering standalone renewable energy capacity is viewed as problematic. ‘Demand following, round-the-clock renewable energy’ is the new mantra for government tenders. The discovered FDRE price per kWh has already come down from INR 8.5 (US cents 9.6) to INR 3.4 (US cents 4) in one case.  

Energy storage has a number of benefits. It helps to reduce variability of generation in renewable energy sources; improves grid stability; flattens or shifts peak electricity demand; provides ancillary support services, which in turn enables more renewable energy integration to the grid; reduces peak tariffs; reduces carbon emissions; defers capital expenditure on transmission and distribution; and allows for energy arbitrage, gathering renewable energy when it has nearly zero cost and selling it at peak demand prices.  

However, battery energy storage systems (BESS) in India are still expensive and import-dependent, despite large government-funded incentive programmes for local battery manufacturing to achieve scale and lower costs. Public enterprises are leading the way, with demonstration projects for the private sector to follow. For example, NTPC Green Energy has just signed a memorandum of understanding with Bihar State Power Generation Company to jointly develop renewable energy and battery energy storage projects in the state of Bihar. Gujarat, one of the leading renewable energy states, is experimenting with a new 2,000 MW/4,000 MWh BESS tendering mechanism, offering a subsidy of $20,800/MWh of awarded capacity.  

Pumped hydro energy storage (PHES) is also under intensive development, but construction is slow and finding private investors is challenging.   

Grid integration of renewable energy is also creating technical instability challenges for various state grids, now that renewable energy penetration is up to 22–40%. Some states need affordable grid-scale storage to avoid curtailment. Forced front-loading of capital upgrades for grid modernisation raises overall green tech electricity costs and erodes renewable energy’s cost advantage over domestic coal.  

Forecasts by Omniscience Capital of electricity consumption quadrupling by 2032 create increased urgency for investment and upgrades to transmission and distribution grids. India’s entire energy transition is being funded with 95% domestically sourced (public and private commercial) resources, at the rate of about $40bn/y. Actual funding needs are over three times as much, given storage and transmission upgrades that must now necessarily accompany renewable energy generation investments if coal is to be displaced. It is not clear if India’s renewable energy investors can be persuaded to diversify into storage and transmission.  

A report issued at the end of July 2025 notes that India needs to invest $155bn in transmission upgrades and $15.5bn to install 300 million smart meters, as part of its energy transition.  

Looking ahead 

Five key action areas are underway to support Phase 2 of renewable energy delivery through the grid.  

The first action is to increase tenders for co-located solar/wind and storage capacity addition, to 50 GW/y. This involves expanding solar parks on degraded land (for example, mined-out areas in Odisha/Chhattisgarh) and promoting agrivoltaics to reduce land conflicts. It also involves supporting R&D for sodium-ion batteries, because over-reliance on imported lithium-ion batteries for BESS is unaffordable and geopolitically difficult.   

The second action is investing in grid modernisation to enable higher renewable energy penetration. Grid stability and avoidance of blackouts is a critical priority for the Indian government. Phase II of the Green Energy Corridors programme, budgeted at INR 12,000cr ($1.44bn), has begun to develop renewable energy-dedicated transmission. The country is continuing to invest in the transmission push to integrate more renewables (a $1.7bn programme is underway) and to expand such projects based on available funding. Development of AI-based forecasting tools under the rubric of dynamic scheduling should reduce curtailment. Work also needs to be done on demand response, to incentivise industries to shift loads to sunny/windy hours, for example, through updated pricing.   

Third, boosting the use of distributed renewable energy is in progress thanks to large government subsidies. A 40 GW rooftop solar target has been set for 2030 (compared to 15 GW installed today). The PM Surya Ghar scheme offers capital subsidies to small rooftop solar systems. The PM KUSUM scheme solarises agriculture by replacing off-grid diesel pumps with solar pumps, and deploying village-level solar and storage microgrids in coal regions (a Jharkhand pilot).  

Fourth is developing and implementing a just transition for coal workers and coal-dependent states. Coal wages under union contracts are twice that of solar. There are very limited prospects for low-literacy work in a fenced solar park, and no prospects for ex-coal workers. Unionised coal mine workers (about 25% of the total affected coal-worker population) resist retraining for fewer jobs and lower pay prospects. Informal coal-dependent workers (coal scavengers) have no legal protection, but enjoy political protection because they vote in large numbers. Another issue is revenue replacement for state budgets in coal-dependent states; for example, Odisha gets 30% of its revenue from coal. The District Mineral Foundation system for coal royalties paid to state governments to take care of mining-affected people is working well, and a suitable alternative is needed for when coal will remain in the ground.   

Fifth is development of green hydrogen for coal replacement in hard-to-abate industrial sectors. The National Green Hydrogen (GH2) Mission is spending the equivalent of $2.3bn to reduce the cost of both electrolysers and production of industrial green hydrogen. Steel, cement and fertilisers cannot be developed without continuous electricity supply. Despite heavy subsidies and a proposed green hydrogen purchase obligation, today’s prices are still too high.  

In conclusion, India continues to apply renewable energy lessons learned as it proceeds on its journey to deliver clean electricity to end customers.  

• Further reading: ‘Delving into a disorderly transition: the latest EI Statistical Review of World Energy reveals ‘a new mindset’.' Read the views of Romain Debarre, Kearney Partner and Managing Director of its Energy Transition Institute, and Wafa Jafri, KPMG Partner and UK Lead for Energy and Natural Resources Strategy, who joined Energy Institute (EI) President Andy Brown OBE FEI and EI CEO Nick Wayth FEI CEng on stage to launch the Statistical Review of World Energy in London in late June. 
• Find out how India’s struggling biofuel industry may finally be picking up as the country’s oil refining major, Reliance Industries, announced an INR 650bn ($7.72bn) investment plan to set up 500 compressed biogas plants over the next three years in the southern state of Andhra Pradesh.