As summer electricity demand surges across India, new analysis by think tank Climate Risk Horizons underscores the urgent need to reduce the country’s reliance on imported coal by accelerating renewable energy (RE) deployment.

India’s electricity sector is heavily dependent on coal imports: 20% of India’s thermal coal was imported at a cost of $21 Billion in 2023-24. The increase in imports is noticeable during summer months when electricity demand spikes due to cooling needs. During the peak summer months of April to June 2024, India imported 2.65 million tonnes (MT) of additional thermal coal per month compared to non-summer months, producing approximately 4.8 billion units (BU) of electricity monthly. Meeting this spike in demand with renewable energy would require about 33 GW of new RE capacity. Deploying this extra RE capacity would save India about $826 Million (₹7,025 CR) each year on thermal coal imports during summer months.

“Recent disruptions in international trade underscore the risks associated with importing such a large proportion of our energy via coal. India’s energy security requires weaning the country off imported thermal coal, and the most cost-effective way to do that is by boosting our RE deployment”, said Vishnu Teja, author of the report.

Despite increasing domestic coal production and significant RE buildout, India’s coal import burden has been steadily increasing. Over the last decade (between 2013-23), the quantity of thermal coal imported by India increased by 58%, but the value of these imports went up by 124%, due to volatile coal prices and rupee depreciation. The rising cost burden contributes significantly to energy inflation, and poses financial risks to both power producers and consumers.

A concentrated effort to meet RE targets by 2030 (by adding 50 GW RE per annum) can reduce coal imports to near zero, with significant savings in forex and a boost to energy security. CRH estimates that by installing 50 GW RE per annum, India could fully eliminate thermal coal imports by the end of 2029, saving about $66 Billion at current prices (₹5,67,545 CR) in forex between 2025 and 2029. Between 2025 and 2034, this could result in a cumulative savings of at least $173 Billion (₹13,90,560 CR) in forex.

“India will have about 80 GW of solar cell manufacturing and 175 GW of module manufacturing capacity by 2026, putting the country in a position to indigenise our energy transition and phase out coal imports. However, even if domestic production falls short, a one-time import of solar components that then generate power for 25 years is still economically superior to importing coal on a continuous basis,” said Ashish Fernandes, CEO of Climate Risk Horizons. “If energy security and reduced forex outflows are the goal, boosting RE deployment to 50 GW annually is imperative.”


Read the full analysis at https://climateriskhorizons.com/research/India's-Coal-Import-Burden.pdf