A Guide to India’s Power Transition

How India successfully built a clean energy boom, and why moving, storing, and paying for it is the real challenge

Hello, welcome to this week’s edition of Points & Figures. This edition is done by Mridula & Kulsum.
This newsletter is a rebranding of what we used to publish as The Chatter, and the idea behind it is simple: to tell stories about the Indian economy, financial markets, and investing through data visualizations. The goal isn’t to send you a bunch of random, out-of-context charts, because pretty much everybody does that already. Instead, we take large datasets that are often overlooked or underappreciated and use them to tell stories about trends, shifts, and developments in the Indian economy and markets that you might not otherwise come across. And like everything else we do under Markets by Zerodha, the quality bar remains extremely high.

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For decades, India built its power system around one goal: delivering electricity to more people quickly enough to sustain economic growth. Coal primarily provided the answer. India possesses large domestic reserves, and unlike solar and wind, coal plants can operate on command, regardless of the time of day or weather conditions. However, coal was never the entire story; hydro, gas, and nuclear power have always been part of the mix. Yet, because the grid, regulations, and decades-long power-purchase contracts were centered on coal, that legacy continues to shape almost every decision India makes today.

Now the objective has evolved. India must meet rapidly climbing electricity demand while simultaneously cleaning up its power generation. The government has set a target of 500 GW of non-fossil-fuel capacity by 2030, complementing its formal climate pledge to derive about half of its installed capacity from non-fossil sources by the same year. The long-term horizon is net-zero emissions by 2070.

The central theme of this piece is a contradiction: India has already met its capacity target. It surpassed the 50% non-fossil mark in mid-2025, five years ahead of schedule. Yet, coal still generates roughly seven out of every ten units of electricity the country consumes. We aim to explain how these two facts coexist: half of the capacity is clean, while the majority of the power generated remains coal-based.

1. The Coal Engine: Why the Grid Still Depends on Coal

It is crucial to understand that capacity and generation are distinct concepts. Capacity represents what has been built, whereas generation represents what actually runs. By January 2026, non-fossil sources accounted for approximately 52% of installed capacity, with coal and lignite reduced to about 44%. However, coal still supplied roughly 69% of the electricity generated in FY2025-26 through January, and 72.4% in April 2026. This is because a coal plant runs for significantly more hours per day than a solar panel or wind turbine.

This is why India cannot simply switch off coal. The grid relies on it for the bulk of its electricity and, crucially, for power that can be scheduled after dark. There is also a more subtle reason: large coal, hydro, and nuclear plants spin heavy turbines. This “spinning mass”—or inertia—cushions the grid against sudden frequency swings when supply and demand fall out of balance. While this does not keep the grid perfectly steady on its own, it acts as a stabilizing force that solar arrays cannot naturally provide.

2. The Sunny Day, Strained Night Paradox

On April 25, 2026, India’s electricity demand reached a record 256.1 GW in the afternoon, which the grid met without shortage. Solar did the heavy lifting; at midday, it supplied nearly one-third of all generation. Across April, renewables covered 16.5% of India’s electricity, the highest monthly share since July 2025.

Yet, that same evening, after solar output faded, the available supply fell short of demand by about 4.2 GW. The previous night, at 10:34 PM, the shortfall was 5.4 GW—roughly the consumption of 27 lakh rural homes. Such shortfalls occurred on 13 of 15 nights in the second half of April. The chart below provides broader context: while solar and wind capacity have grown quickly, their output is concentrated in specific hours and seasons.

The paradox is not that India lacks aggregate generating capacity. Instead, the system can produce a surplus of variable renewable power at midday but fails to provide enough dispatchable generation, storage, or imported power after sunset.

That evening shortfall is, at its core, a flexibility problem. Once solar vanishes, the system cannot bring enough coal, hydro, gas, or storage online quickly enough to keep pace. There is a second, related problem: during peak solar hours, congestion and limited flexibility can force renewable plants to throttle their production. India therefore requires two simultaneous solutions: enough firm supply for the evening and a grid nimble enough to move and store the daytime solar power it already produces.

3. The Clogged Pipelines: Grid and Hardware Bottlenecks

Building renewable capacity is only the first step; electricity must also be moved from resource-rich regions to demand centers at the right time.

India’s renewable resources are geographically lopsided. Rajasthan, Gujarat, Karnataka, and Andhra Pradesh lead in solar, while Gujarat and Tamil Nadu dominate wind power. Demand, however, is dispersed across industrial corridors, cities, and towns. Therefore, renewable-rich states require robust interstate links to transmit power, and building these links has become a bottleneck.

The scale of the planned infrastructure is enormous. A 2022 blueprint for integrating over 500 GW of renewables envisioned approximately 51,000 circuit kilometers of interstate lines and 433,500 MVA of transformation capacity, at an estimated cost of ₹2.44 lakh crore. Separately, the National Electricity Plan aims to increase inter-regional transfer capacity from 119 GW to 168 GW by 2032. These represent related, parallel efforts.

Execution is lagging on four fronts. The most stark example is in Rajasthan, India’s top solar state. In April 2026, the Central Transmission Utility informed the regulator that it was struggling to find transmission routes for roughly 60 GW of renewable projects seeking connectivity. This does not represent 60 GW of stranded power, but rather proposed capacity awaiting a viable way to connect. Furthermore, there is the issue of curtailment: when the grid cannot safely absorb or move renewable power, operators instruct plants to reduce output. An Ember analysis identified complete curtailment of some short-term renewable trades, especially between 11 AM and 2 PM, while separate reporting for April 2026 estimated average curtailed solar at about 23 GWh per day—clean power that was built and paid for, but wasted because the grid could not accommodate it.

Hardware is the third choke point. Transformers are in short supply worldwide. In India, lead times for 220-kV transformers have stretched from about eight to 14 months, with copper and specialized electrical steel adding cost pressure. Finally, the lines themselves face delays due to right-of-way disputes, land acquisition issues, forest and wildlife clearances, litigation, and procurement delays. Building a transmission corridor is often more challenging than constructing the solar farm that feeds it.

4. Shifting Electricity Through Time—and Fixing the Money Flow

Transmission moves electricity across geography; storage moves it across time. Pumped-storage hydropower and batteries can absorb cheap solar power at midday and release it after sunset, smoothing the steep evening ramp that conventional plants must otherwise manage.

India’s storage base remains small relative to the need. CEA data for January 2026 recorded about 276 MW / 792 MWh of grid-scale battery storage. Pumped storage accounts for several gigawatts, with a larger pipeline planned, but these projects are capital-intensive and require years to secure approvals and complete construction.

Funding all of this—storage, local upgrades, and the flexible grid—is complicated by the finances of the state-owned distribution companies (DISCOMs). Many of these companies lose money on every unit sold, spending more to supply electricity than they recover. The causes are complex: subsidized tariffs, delayed government subsidy payments, high technical and commercial losses, and weak billing and collection. Attributing these losses solely to free electricity is an oversimplification. Smart meters can help by improving measurement, billing, and enabling time-of-day pricing that shifts consumption to sunny hours. However, a meter cannot fix a balance sheet; tariff reform, timely subsidies, and loss reduction must accompany these measures. Without healthy DISCOMs, there is no entity to pay for the flexible grid required for this transition.

5. The Hidden Climate Cost of Continued Coal Use

The reliance on firm power explains why renewable growth has not yet displaced coal, and this dependency carries two distinct climate costs: one obvious and one largely invisible.

The obvious cost is power-plant carbon dioxide emissions, where the data tells a blunt story. Coal accounts for the overwhelming majority of the power sector’s emissions. Even as generation and capacity have climbed sharply since 2019, the carbon intensity of each unit has barely budged. This indicates that the increased demand was met largely by burning more fossil fuel rather than displacing it.

The hidden cost is methane. India produced about 1.048 billion tonnes of coal in FY2024-25, and the government expects output to grow by 6–7% annually to about 1.5 billion tonnes by FY2029-30. This includes an initiative to increase underground output beyond 100 million tonnes annually by FY2028-29, starting from a small current base. Mining coal releases trapped gas; unless captured or destroyed, this methane escapes. This is significant because methane has more than 80 times the warming potential of CO₂ over a 20-year period and has driven roughly 30% of the temperature rise since the Industrial Revolution.

Global Energy Monitor has modeled India’s coal-mine methane at 1.6 million tonnes by 2029—approximately 138 million tonnes of CO₂-equivalent on a 20-year basis. While this is a modeled projection rather than an official inventory, it highlights a large, undercounted source of emissions that is not captured when analyzing only power-plant emissions.

6. Conclusion: One Transition, Many State-Level Realities

There is no single Indian energy transition; there are dozens, because resource quality, demand, legacy plants, and procurement processes vary by state.

Some states are well advanced. Karnataka and Rajasthan generate large shares of their electricity from clean sources; Rajasthan leads in installed solar capacity, while Gujarat and Tamil Nadu are wind powerhouses. Nuclear energy provides a smaller but reliably low-carbon layer. India had 8.78 GW installed by January 2026, with an ambition of reaching 100 GW by 2047—an ambitious goal requiring significant investment, regulatory reform, and time.

Coal-heavy industrial states face the opposite scenario. Uttar Pradesh and Chhattisgarh rely primarily on coal for their electricity, and Chhattisgarh—home to a vast fleet of coal plants—is among the largest state-level emitters in the power sector. Bihar and Jharkhand also operate carbon-intensive grids. These comparisons are only meaningful with context: total emissions indicate scale, while grams of CO₂ per kilowatt-hour indicate intensity.

Nationally, the trend is clear. Renewable electricity’s share rose from about 14% in 2000 to 19.8% in 2024 according to Ember’s data. This represents real progress, yet it remains well behind global peers when measured on a like-for-like basis (wind, solar, hydro, and other non-nuclear renewables).

India’s central challenge is no longer just adding megawatts—it is ahead of schedule in that regard. The challenge is stitching the pieces together: integrating clean generation, firm evening supply, necessary transmission, time-shifting storage, and ensuring DISCOMs are solvent enough to pay for the system. If the energy reaches the right place at the right time, the transition works. If any of these pieces fail, the grid will continue to rely on coal after dark.

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