Rising Power Demand May Drive India's Emissions Up in 2026

With a rebound in power demand following a dip in coal generation, India's emissions may rise as thermal plants adapt to economic shifts.

pocketias team

•February 19, 2026•6 mins read

Coal decline temporary amid rising demand

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1. 2025 Emissions Moderation: A Temporary Pause, Not a Structural Shift

India reduced coal-based power generation in 2025 for the first time in 53 years, leading to a moderation in emissions growth. However, this reduction coincided with slower electricity demand growth and favourable monsoon conditions rather than a fundamental shift away from fossil fuels.

Globally, fossil-fuel carbon emissions are projected to rise by 1.1% in 2025 to a record high (Global Carbon Project). India’s emissions are estimated to have grown by 1.4% year-on-year (Y-o-Y) in 2025, significantly lower than the 4%+ growth in 2024. This indicates moderation, but not absolute decline.

Coal-fired generation in India declined by 3% Y-o-Y to 1,283 billion kilowatt hours (kWh) in 2025 — a sharp reversal from earlier increases of 5% in CY24 and 15% in CY23 (CREA).

“The moderation in emissions seen in 2025 reflects a temporary slowdown rather than a lasting decline.” — Navin Mathur, Asvata

The governance lesson is that short-term emission dips driven by weather or cyclical demand cannot be mistaken for structural decarbonisation. If policymakers assume structural progress without systemic reform, emissions may rebound sharply.

2. Drivers Behind the 2025 Decline: Weather and Demand Dynamics

The moderation in electricity demand growth in FY26 was largely attributed to early and extended monsoons, which reduced cooling demand and agricultural power consumption.

Lower coal usage and higher renewable generation also contributed. However, these factors were cyclical rather than structural. Peak electricity demand in 2025 reached 242 GW on June 12, down 3% Y-o-Y (Grid Controller of India).

Industry projections suggest demand growth will rebound:

Asvata: 4–6% Y-o-Y demand growth in 2026
Avaada: 5–7% growth
ICRA: 5–5.5% growth in FY27

Weather-induced moderation creates a misleading sense of transition progress. Without structural changes in generation mix and storage capacity, economic recovery will automatically raise fossil-based generation.

3. Economic Growth and Emissions: The Development–Decarbonisation Dilemma

India remains one of the fastest-growing major emerging economies. Rising economic activity, urbanisation, EV penetration, data centres, and green hydrogen production are expected to increase electricity demand substantially.

While India is adding renewable capacity, it may not be sufficient to meet rising demand entirely. Coal-based capacity additions increased to 9 GW in 2025, up from 4 GW in 2024 (CREA), signalling continued reliance on thermal power.

“As electricity demand rebounds in 2026, coal will continue to anchor the power system.” — Navin Mathur

Thermal power continues to serve as the baseload and balancing source during peak and low renewable periods.

India faces a structural balancing challenge: sustaining high GDP growth while reducing carbon intensity. If renewable expansion does not outpace incremental demand, coal will fill the gap, raising emissions.

4. Renewable Expansion: Progress with Integration Constraints

The International Energy Agency (IEA) states that India is on track to meet approximately 95% of additional electricity demand growth between 2025 and 2027 through renewables. This reflects strong policy push under India’s clean energy transition commitments.

However, renewables face intermittency constraints. Storage capacity, grid flexibility, and transmission infrastructure remain critical bottlenecks. Industry experts note that while renewables may cover incremental load, thermal generation is still required for grid stability.

“Thermal will still form the base load.” — Sanchit Makhija, Kearney

“But a firm decline in absolute emissions will depend on how much fossil generation is still used to balance increased demand.” — Vineet Mittal, Avaada

Key Challenges:

Grid flexibility limitations
Insufficient storage capacity
Peak demand management
Renewable intermittency (low wind/low sun periods)

Renewable capacity addition alone does not guarantee emission reduction. Without parallel investment in storage and grid integration, fossil fuels will remain the balancing backbone.

5. India vs China: Diverging Emissions Trends

China’s emissions may have declined by 0.3% in 2025, extending a flat or falling trend since March 2024 (CREA). China added more renewable capacity in one year than the rest of the world combined and now has electric vehicles accounting for over 50% of new vehicle sales, reducing oil demand.

India, by contrast, remains the largest contributor to global oil demand growth. Transport fuel use and thermal generation continue to push emissions upward.

Comparative Insights:

China’s renewable additions exceed incremental demand.
India’s renewable growth, though significant, may not fully offset demand growth.
Structural electrification in transport is faster in China.

The comparison shows that renewable growth must exceed incremental demand to produce absolute emission decline. Without such overcapacity, emissions stabilisation remains difficult.

6. Air Pollution and Public Health: The Local Dimension

Despite lower thermal emissions in 2025, cities such as Delhi recorded severe air pollution episodes, with particulate matter levels reaching 80 times WHO standards.

Higher coal-based generation and transport fuel consumption typically raise carbon dioxide and local pollutant levels. Thus, climate mitigation and air quality management remain interconnected.

This links GS3 (Environment), GS2 (Public Health Governance), and urban policy. Poor air quality increases healthcare burden and productivity losses.

“The greatest threat to our planet is the belief that someone else will save it.” — Robert Swan

If emission control is treated solely as a climate issue and not as a public health imperative, urban pollution crises will persist despite renewable expansion.

7. Thermal Power: Anchoring the Transition

Coal generation fell 3% Y-o-Y in 2025 but remains central to India’s power system. Industry experts argue that thermal capacity must be ramped up to ensure grid reliability during demand spikes.

The rebound in electricity demand, coupled with weather normalisation and economic acceleration, may raise emissions again in 2026.

Structural Reality:

Coal acts as baseload and firming source.
Renewable intermittency necessitates backup.
Peak demand periods stress the system.

An orderly transition requires managing coal dependence rather than abruptly eliminating it. Premature withdrawal without alternatives risks energy insecurity.

Conclusion

India’s 2025 emission moderation reflects cyclical factors rather than structural decarbonisation. As economic growth accelerates and electricity demand rebounds, coal will likely continue to anchor the power system unless renewable integration, storage, and grid flexibility improve rapidly.

The policy challenge is to ensure that renewable expansion consistently exceeds incremental demand growth. Only then can India shift from slowing emissions growth to achieving sustained absolute reductions, aligning development objectives with climate commitments and energy security.

Quick Q&A

Everything you need to know

India witnessed a slowdown in emissions growth in 2025, with emissions rising by about 1.4% year-on-year compared to over 4% in 2024. Coal-based power generation declined for the first time in 53 years, marking a significant moment in India’s energy trajectory. However, this moderation was primarily driven by temporary factors such as lower electricity demand growth, a favourable and extended monsoon, and higher renewable generation rather than a deep structural transition away from fossil fuels.

Industry experts have highlighted that weather-induced demand moderation and cyclical economic factors played a major role. For instance, peak power demand in 2025 fell by 3% year-on-year, and coal generation declined by 3%, reversing strong growth trends in previous years. However, coal capacity additions still increased to 9 GW, signalling continued reliance on thermal power.

Therefore, while the numbers indicate progress, the underlying energy structure remains fossil-fuel dependent. Without systemic reforms such as grid flexibility, storage expansion, and sustained renewable dominance, the moderation cannot be interpreted as a permanent decarbonisation trend.

India’s economic growth trajectory directly influences its energy demand. As economic activity strengthens, electricity demand is projected to grow between 5–7% in FY27, driven by expanding industries, EV adoption, data centres, and green hydrogen production. This rebound in demand is likely to outpace renewable additions in the short term, necessitating continued reliance on coal for base-load and peak balancing requirements.

Renewables such as solar and wind are inherently intermittent. While India is expected to meet nearly 95% of incremental demand growth between 2025 and 2027 through renewables, thermal power remains essential during low-wind or low-sun periods. Experts such as those from Avaada Group and Kearney emphasise that coal will continue to anchor the grid until storage and flexibility mechanisms are significantly scaled up.

Thus, the rebound in emissions is not merely a failure of policy but reflects the structural challenge of balancing growth with decarbonisation. India’s development needs, urbanisation, and rising energy access requirements make this trade-off particularly complex.

Thermal power, especially coal-based generation, continues to form the backbone of India’s electricity system. It provides reliable base-load power and grid stability, which renewables alone currently cannot ensure due to intermittency issues. In 2025, despite a decline in coal generation, new coal capacity additions rose sharply, indicating policymakers’ cautious approach toward energy security.

However, continued thermal dependence has significant environmental and health costs. Cities like Delhi recorded pollution levels far exceeding WHO standards, highlighting the disconnect between lower carbon emissions and persistent air quality crises. Furthermore, rising transport fuel use and industrial expansion could offset gains from reduced coal generation.

A balanced view suggests that while thermal power is necessary in the short-to-medium term, it must gradually transition to a supporting and balancing role. Accelerated deployment of battery storage, pumped hydro, green hydrogen, and grid modernisation can reduce coal’s dominance. The challenge lies in ensuring energy security without locking in carbon-intensive infrastructure for decades.

China’s emissions are projected to decline slightly in 2025, continuing a ‘flat or falling’ trend. This is largely due to massive renewable capacity additions—more than the rest of the world combined—and rapid electrification of transport, with EVs accounting for over half of new vehicle sales. China’s renewables are sufficient to meet incremental demand, reducing fossil fuel dependence.

In contrast, India’s renewable additions, though significant, are not yet adequate to fully absorb rising electricity demand driven by faster economic growth. India remains the largest contributor to global oil demand growth, reflecting expanding mobility and industrialisation. While both countries reduced coal generation in 2025, China’s structural renewable dominance appears stronger.

This comparison highlights that energy transition pathways are shaped by economic structure, scale of renewable investment, technological maturity, and policy consistency. India’s challenge is to accelerate renewable deployment and storage at a pace comparable to its growth momentum.

To stabilise emissions while sustaining economic growth, the government must adopt a multi-pronged strategy. First, accelerate energy storage deployment through incentives for battery manufacturing and pumped hydro projects. Storage is crucial to reduce coal dependence during peak and non-renewable periods.

Second, enhance grid flexibility and transmission infrastructure to integrate higher shares of renewable energy efficiently. Investments in smart grids and regional balancing markets can optimise renewable absorption. Third, strengthen demand-side management through energy efficiency programmes in industry, buildings, and appliances.

Additionally, electrification of transport and green hydrogen deployment should be aligned with renewable capacity growth to prevent fossil backsliding. Finally, rational carbon pricing or expansion of carbon markets can internalise environmental costs. By combining supply-side reforms with demand management, India can potentially flatten emissions growth without compromising development objectives.