India's coal-fired power generation declined for the second time in at least half a century in 2025, with the earlier drops primarily influenced by the COVID-19 pandemic in 2020. However, the 2025 decline was driven by structural changes in the country's power mix, rather than economic factors.

In 2025, India's coal-fired power generation fell by approximately 3% year on year, marking the second decline in at least five decades and the first decline attributed to the growth of clean energy, according to a report released by the Centre for Research on Energy and Clean Air (CREA).

India's power sector is undergoing rapid transformation as renewable energy installations continue to accelerate year after year. The declines in coal- and natural gas-fired power generation reflect the record growth of clean power, a mild weather-induced reduction in cooling demand, and a long-term slowdown in potential power demand growth.

Fossil fuel power generation experienced a significant downturn. Compared to trends in 2019-2024, combined power output from coal and gas saw a notable reversal. During this period, the average annual increase in fossil fuel power generation reached 63 TWh, but in 2025, this figure dropped by about 50 TWh, creating a gap of 113 TWh compared to previous trends.

Record growth in non-fossil fuel energy generation was a key factor in this shift. In 2019-2024, annual increases in clean energy generation rose from 22 TWh to 71 TWh, accounting for 44% of the decline in coal- and gas-fired generation. In 2025, renewable power generation grew 22% year on year, with large hydro generation increasing by 15%.

Weather conditions also had a significant impact on India's power demand. Relatively milder weather reduced cooling demand from air conditioners, leading to an expected reduction of 41 TWh in power demand compared to normal temperature scenarios. This partly contributed to the 36% decline in fossil fuel power generation. The remaining 20% of the decline was mainly attributed to the longer-term slowdown in power demand growth, which began in late 2023.

"Temperature-adjusted analysis indicates that the slowdown in electricity demand growth began in late 2023. Heatwaves in 2024 temporarily masked this trend by boosting cooling demand, but once temperatures normalized in 2025, the underlying deceleration became clear," according to the report.

In the first eleven months of 2025, India's newly added renewable energy capacity reached a historical high of 41 GW, bringing renewable energy's share of total capacity to 40%.

The growing share of renewable energy is increasingly meeting rising power demand, particularly during the daytime when solar power is abundant, further accelerating the shift from coal-fired to renewable energy.

These findings highlight the challenge of continuing to expand coal-fired power capacity to meet peak electricity demand. In 2025, India's power demand peaked at 242 GW, but only 216 GW of thermal power capacity was operational, with the remaining 26 GW offline due to maintenance or malfunction. Despite this, solar, hydro, and other renewable energy sources easily met the demand.

During daylight hours, the peak solar power-generating period, solar power alone contributed as much as 60 GW of power capacity, significantly easing the pressure on thermal power plants. The report notes that India's current coal-fired power capacity is sufficient to meet demand outside peak solar hours, especially when combined with hydro and other dispatchable power sources.

The CREA also highlights that India's long-term targets further reduce the need to build new coal-fired power plants. The country is expected to meet its power demand growth by 2030, achieving the government's goal of 500 GW of non-fossil fuel capacity, even under a scenario of accelerated demand by 2035.

According to the Central Electricity Authority (CEA), if India maintains an annual growth rate of 50 GW in renewable capacity, coal-fired power capacity will have no room for expansion by 2030. Despite expectations of further gains in coal-fired capacity, power output from coal plants is projected to remain stable or decline, leading to lower power loads.

This could lead to risks of overcapacity and financial pressure for coal-fired power plants. The report warns that the completion of current coal-fired projects under construction may exacerbate overcapacity issues. If these plants are commissioned, utilization rates are likely to drop to historically lows, which would place additional financial strain on power companies and increase electricity costs.

Manoj Kumar, an analyst at CREA, noted that India's power sector no longer faces a lack of production capacity, but rather an inflexible system. To lower the minimum technical loads at coal-fired plants, expand battery storage capacity, and strengthen the power transmission network are essential steps to integrate increasing renewable energy growth and avoid investment risks associated with new coal-fired projects.

With renewable energy now comprising around 40% of India's power mix and many solar, wind, and storage projects in development, policymakers should shift their focus from expanding coal-fired power capacity to improving grid flexibility, operational efficiency, and reducing costs in a clean energy-driven power system.