The International Energy Agency (IEA) report has forecasted that India will play a pivotal role in driving global coal demand growth until 2026, despite the recent COP28 climate declaration advocating for the elimination of fossil fuels.
The IEA coal market report for 2023 anticipates a 3.5% annual increase in India’s coal demand, reaching 1,397 million tons (mt) by 2026. The projection persists even as India aims to triple its solar power capacity by 2026 and achieve a 50% share of green power by 2030.
Currently, coal-fired generation contributes around 70% to the electricity grid. The report highlights the necessity for additional coal-based generation capacity in India, stating that the growth in solar power alone may not suffice to meet the rising demand for power required to sustain economic growth.
Despite ongoing efforts to expand solar power capacity, the report emphasises the need for 30,000 MW of new thermal generation capacity, in addition to the 50,000 MW already in progress, to prevent shortages amid increasing electricity demand.
Power generation is a key factor influencing India’s coal demand, constituting 74% of consumption. In 2022, coal consumption for power generation surged by 9% to 1,162 metric tons, marking the second consecutive year of significant growth following a 14% increase in 2021 during the economic recovery from the pandemic. The report projects a 2.4% annual increase in coal consumption for power generation, reaching 1,006 metric tons by 2026, based on a 5% GDP growth estimate for the next three years.
The report also raises doubts about the effectiveness of the biomass co-firing policy in reducing coal consumption, citing the nascent stage of the biomass supply chain. As reported by The Times of India, the policy, scheduled to be implemented in April 2024, mandates a blending rate of 5% for coal plants, with plans to increase it to 7% subsequently.
