Significant changes are underway in India’s power sector. While coal production is increasing, rapid development is taking place in renewable energy sources such as solar and wind energy. According to reports, for the first time in FY24, the share of coal in India’s total installed electricity generation capacity has fallen below 50%.
Let’s understand what the declining share of coal and the increasing contribution of renewable energy means for investors.
What’s Happening?
The Council on Energy, Environment, and Water (CEEW) stated on May 2, 2024, that there is a rapid transformation in installed energy capacity in India. In FY24, the share of coal fell below 50% of India’s total installed capacity for the first time, with the country’s total installed energy capacity reaching 441.97 gigawatts, of which 143.6 gigawatts (32.5%) came from renewable sources and 46.9 gigawatts (11%) from hydropower.
This is a significant change indicating that India is moving away from coal rapidly and towards renewable energy sources.
Why is Electricity Demand Rising in India?
Electricity demand in India is continuously rising, and according to the CEEW-CEF report, it reached a new high of 240 gigawatts in FY24. Several reasons have been cited for this growth, including rapid economic development, below-average rainfall, above-normal temperatures, and severe cold in northern India. Moreover, there has been an approximately 8% growth in total electricity consumption compared to the previous fiscal year.
India’s Power Sector
There has been a notable increase in India’s total electricity production capacity. This year, the total capacity increased by 6.22% to reach 441.97 gigawatts compared to the previous year.
According to the India Brand Equity Foundation (IBEF), the Central Electricity Authority (CEA) estimates that electricity demand will increase to 817 gigawatts by 2030. To meet this growing demand, the government aims to establish 500 gigawatts of renewable energy capacity by 2030. Additionally, the CEA estimates that the share of renewable energy production will increase from 18% to 44% by 2029-30.
India’s Coal Production
Coal production in India increased by 7.41% to 78.69 million tons (MT) in April 2024, compared to 73.26 MT in the previous year. Coal dispatch also increased from 80.23 MT to 85.10 MT (provisional).
In April, Coal India Limited (CIL) produced 61.78 million tons (provisional) of coal, which is a 7.31% increase. Captive/other producers contributed 11.43 million tons, marking a 12.99% increase.
What Does This Mean for Investors?
The changes occurring in India’s energy sector present several opportunities for investors. Despite the growth in coal production, the rapid progress in the renewable energy sector is attractive for investors.
The CEEW-CEF report indicates that for the first time in FY24, coal’s contribution to power generation fell below 50%. This signals that India’s energy sector is moving towards becoming more sustainable in the future, prompting investors to start looking for better companies in the renewable energy sector and consider investment opportunities with the right valuation.
What’s Next?
According to the CEEW-CEF report, India is taking its nationally determined contributions (NDC) to climate change seriously. In August 2022, India officially informed the United Nations that it would reduce its GDP emission intensity by up to 45% from 2005 levels by 2030. Additionally, India aims to meet 50% of its total electricity needs through non-fossil fuel-based power sources by 2030.
However, the same report also highlights that India’s maximum power demand continued to rise steadily in FY24, reaching a new high of 240 gigawatts.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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