Falling Battery Costs Make Coal Expansion Uneconomical for India: EMBER

India does not need to add more coal capacity beyond what is outlined in its National Electricity Plan (NEP) 2032 targets, either for reliability or peak demand, as doing so would be uneconomical, energy think tank Ember said in a new report on Tuesday.

The report said that if India meets its NEP 2032 goals for solar, wind and energy storage, the country will have more than enough capacity to meet demand, with additional coal units likely to remain idle.

Ember’s least-cost operations model showed that by fiscal year (FY) 2031-32, around 10% of coal capacity added from FY 2024-25 would be completely unused, while about 25% would operate at very low utilisation levels. Falling utilisation rates would push up fixed and operational costs, making coal-based electricity about 25% more expensive by FY 2031-32 compared with FY 2024-25.

New Transition Phase 

“India’s power system is entering a new phase of transition. As renewables gain a bigger share of the generation mix and storage becomes cheaper, coal’s role diminishes. Building coal beyond the current pipeline is neither necessary nor economical,” said Neshwin Rodrigues, senior energy analyst for Asia at Ember.

Firm and dispatchable renewable energy (FDRE) – renewable energy paired with battery storage – is emerging as a competitive alternative, with tariffs in the range of 4.3–5.8 rupees per kilowatt-hour ($49–67 per megawatt-hour) and proven reliability, the report said.

Driven By Auctions 

The shift is being driven by large-scale auctions, falling prices and advances in battery technology.

Dave Jones, Ember’s chief analyst, said grid-scale batteries were becoming central to India’s energy security, adding that modern sodium-ion batteries, which use no critical minerals, have lifespans extending over decades.

“India’s auctions are already incorporating more hours of battery storage. Batteries will increasingly work with solar to provide 24/7 power,” Jones said. “There’s no reason India can’t replicate its success in solar manufacturing to achieve self-sufficiency in batteries.”

According to the report, the average plant load factor (PLF) of coal plants is projected to drop to 55% in FY 2031-32 from 69% in FY 2024-25, as coal transitions from a baseload source to a flexible balancing resource. Coal units will need to ramp up and down by as much as 70–80 gigawatts between morning and mid-day, often running just above their technical minimum levels.

Lower PLFs

Lower PLFs and increased cycling will drive up both fixed and variable costs for coal under power purchase agreements, the report said.

Coal-based power has already become expensive, with recent tariffs exceeding 6 rupees per kWh ($68/MWh) in Bihar and about 5.85 rupees per kWh ($66/MWh) in Madhya Pradesh, despite proximity to coal-producing regions. Much of the increase stems from high fixed costs, often above 4 rupees per kWh ($45/MWh).

At lower utilisation levels, such tariffs could rise to 7.25 rupees per kWh ($83/MWh) for distribution companies, Ember estimated, increasing the risk of stranded assets that remain underused but still require servicing.

“Having learned from past coal overbuild, India must avoid repeating old mistakes amid a rapidly changing energy landscape,” said Duttatreya Das, energy analyst for Asia at Ember. “Renewables with storage now clearly stand out as the more prudent investment choice.”

The report urged policymakers to accelerate energy storage deployment, retrofit select coal plants for greater flexibility, and strengthen grid dispatch and reserve frameworks to integrate renewables at the lowest cost.