After Reading This Article You Can Solve This UPSC Mains Model Questions:
India’s energy transition requires structural reforms beyond renewable capacity expansion to reduce coal dependence and ensure long-term energy security. Discuss. 15 Marks (GS-3, Economy)
Context
- The sharp increase in global energy prices amid the intensifying conflict in West Asia has once again exposed India’s persistent exposure to external energy disruptions.
- Even with significant progress in renewable energy expansion, nearly half of the India’s fossil fuel imports continues to move through the Strait of Hormuz, including crude oil supplies from Saudi Arabia and Liquefied Natural Gas (LNG) imports from Qatar.
- While India is widely regarded as an important player in the global clean energy transition, its power sector still relies predominantly on coal for electricity generation.
Expansion of Renewable Energy Capacity in India
- Growth in Installed Renewable Capacity Since 2017: Since 2017, renewable energy sources have consistently contributed the largest share of new power capacity additions in India.
- By March 2026, renewables constituted 42.4% of the total installed power capacity, compared to merely 0.72% in March 2005. During the same period, the share of coal-based capacity declined from 58.7% to 42.2%.
- Gap Between Installed Capacity and Actual Power Generation: Despite accounting for more than two-fifths of installed capacity, renewable energy generated only 15.8% of India’s actual electricity output in April 2026.
- In contrast, coal continued to dominate electricity generation with a 71.8% share, only slightly lower than its 76.2% contribution in March 2019.
- Renewables Have Expanded Alongside Coal Rather Than Replacing It: India has added very little new fossil fuel-based capacity since 2018, while only a negligible number of old coal plants have been retired.
- As a result, renewable energy growth has occurred without reducing the existing coal base. Additionally, the decline in gas-based power capacity has further reinforced coal’s dominance in actual electricity generation.
- Consequently, the ongoing energy transition is expanding the power grid without substantially decarbonising it.
Key Issuses in India’s Power System
- Intermittency of Solar and Wind Energy: Solar panels generate electricity only during sunlight hours, while wind turbines operate only when wind is available. However, electricity demand remains continuous and peaks in the evening when solar output falls to zero. This mismatch forces grid operators to retain coal plants as constant backup support.
- Lack of Large-Scale Battery Storage: Storing excess renewable electricity for use during peak demand requires grid-scale battery storage systems. India currently lacks such infrastructure at the required scale, making it difficult to depend entirely on renewables for uninterrupted power supply without risking blackouts.
- Weak Grid Infrastructure and Transmission Bottlenecks: India’s transmission network is still unable to efficiently transfer electricity from renewable-rich states such as Rajasthan and Tamil Nadu to high-demand states like Uttar Pradesh and Bihar. This results in curtailment of renewable power and continued reliance on local coal-based plants.
- Coal Continues to Provide Grid Stability: The continued role of coal is not merely a policy failure but also reflects existing technological limitations. Coal provides essential baseload reliability and balancing support that intermittent renewables, without sufficient storage and grid flexibility, cannot yet fully replace.
Impact of Global Energy Shocks on India
- Link Between Electricity Prices and Global Oil Markets: Historical trends show that India’s electricity tariffs closely follow Brent crude oil prices because coal continues to determine the marginal cost of power generation. Rising global crude prices increase coal costs, raise electricity tariffs, fuel inflation, and add fiscal pressure on governments and state electricity boards.
- India’s Position Compared to China and Spain:China has significantly reduced its dependence on fossil fuels, with oil and gas accounting for only 4% of its electricity mix. At the same time, electric vehicles contribute over half of new car sales, reducing oil demand by more than one million barrels per day.
- Similarly, Spain has broken the gas-electricity price link through deeper renewable integration. India, however, remains exposed because coal still dominates electricity generation and pricing.
- Geopolitical Crises Directly Affect India’s Economy: Since fossil fuels continue to determine electricity prices in India, instability in West Asia, disruptions in the Strait of Hormuz, or any global supply shock directly increase energy costs for Indian industry, agriculture, and households, weakening competitiveness and household budgets.
Way Forward for Transforming India’s Energy System Beyond Capacity Expansion
- Large-Scale Investment in Battery Storage: The most critical requirement for India’s energy transition is affordable grid-scale battery storage. Without large-scale storage to supply electricity during evenings and cloudy periods, intermittent renewable energy cannot replace coal in actual power generation, irrespective of installed capacity.
- Modernisation of Grid Infrastructure: India’s power grid must be upgraded to manage bidirectional power flows, integrate distributed renewable sources, enable real-time demand-supply balancing, and reduce the risk of outages caused by aging infrastructure.
- Strengthening Inter-State Transmission Networks: Green energy corridors linking renewable-rich states with major demand centres must be expanded rapidly. This will enable surplus solar power from Rajasthan and wind power from Tamil Nadu to reach high-demand states such as Uttar Pradesh and Bihar, improving utilisation of installed capacity.
- Reforms in Electricity Markets: India’s electricity market structure must evolve to encourage energy storage, flexible generation, and demand-response mechanisms. Measures such as time-of-day pricing, ancillary service markets, capacity payments, and green energy trading platforms can accelerate renewable integration.
- Planned and Phased Retirement of Coal Plants: India requires a structured and time-bound strategy to retire old, inefficient, and highly polluting coal plants gradually as storage and balancing capacity expands, rather than relying only on fiscal pressure or chance.
- Faster Adoption of Electric Vehicles: Rapid adoption of electric vehicles (EVs), especially in two-wheelers, three-wheelers, and public transport, can significantly reduce India’s dependence on crude oil imports. Smart overnight EV charging can also support the grid as a form of distributed storage.
- Matching Energy Targets with Infrastructure Expansion: India has set a target of 500 GW of non-fossil fuel capacity by 2030 and aims to achieve 60% non-fossil fuel power by 2035. However, these goals will succeed only if supported by equally ambitious investments in storage, transmission, and grid infrastructure.
Conclusion
- India’s energy transition is real but incomplete, because expanding renewable capacity without replacing coal in actual generation leaves the country equally exposed to global energy shocks, import dependence, and geopolitical instability as before.Therefore, it must urgently focus on building storage, grid modernisation, transmission connectivity, and market infrastructure so that India’s growing renewable capacity can finally displace coal in everyday electricity generation and make the green transition a genuine economic reality
