Electricity generation from coal, terawatt hours per year. Source: NITI data portal.
In the first half of 2025, total power generation increased by 9 terawatt hours (TWh) year-on-year, but fossil power generation fell by 29TWh, as output from solar grew 17TWh, from wind 9TWh, from hydropower by 9TWh and from nuclear by 3TWh.
Analysis of government data shows that 65 per cent of the fall in fossil-fuel generation can be attributed to lower electricity demand growth, 20 per cent to faster growth in non-hydro clean power and the remaining 15 per cent to higher output at existing hydropower plants.
Slower growth in electricity usage was largely due to relatively mild temperatures and high rainfall, in contrast to the heatwaves of 2024. A slowdown in industrial sectors in the second quarter of the year also contributed.
Lower temperatures and this abundant rainfall reduced the need for air conditioning, which is responsible for around 10 per cent of the country’s total power demand. In the same period in 2024, demand surged due to record heatwaves and higher temperatures across the country.
The growth in clean-power generation was buoyed by the addition of a record 25.1GW of non-fossil capacity in the first half of 2025. This was a 69 per cent increase compared with the previous period in 2024, which had also set a record.
Solar continues to dominate new installations, with 14.3GW of capacity added in the first half of the year coming from large scale solar projects and 3.2GW from solar rooftops.
Solar is also adding the majority of new clean-power output. Taking into account the average capacity factor of each technology, solar power delivered 62 per cent of the additional annual generation, hydropower 16 per cent, wind 13 per cent and nuclear power 8 per cent.
The new clean-energy capacity added in the first half of 2025 will generate record amounts of clean power. As shown in the figure below, the 50TWh per year from this new clean capacity is approaching the average growth of total power generation.
(When clean-energy growth exceeds total demand growth, generation from fossil fuels declines.)
Columns: Six-monthly growth in clean-energy generation, by source, TWh. Dashed line: Average growth in electricity demand, 2021-2024, TWh. Source: CREA analysis of figures from the NITI data portal, with added capacity converted to expected annual generation based on average capacity factors calculated from monthly capacity and generation data.
India is expected to add another 16-17GW of solar and wind in the second half of 2025. Beyond this year, strong continued clean-energy growth is expected, towards India’s target for 500GW of non-fossil fuel capacity by 2030 (see below).
Slowing oil demand growth
The first half of 2025 also saw a significant slowdown in India’s oil demand growth. After rising by 6 per cent a year in the three years to 2023, it slowed to 4 per cent in 2024 and zero in the first half of 2025.
The slowdown in oil consumption overall was predominantly due to slower growth in demand for diesel and “other oil products”, which includes bitumen.
In the first quarter of 2025, diesel demand actually fell, due to a decline in industrial activity, limited weather-related mobility and – reportedly – higher uptake of vehicles that run on compressed natural gas (CNG), as well as electricity (EVs).
Diesel demand growth increased in March to May, but again declined in June because of early and unusually severe monsoon rains in India, leading to a slowdown in industrial and mining activities, disrupted supply-chains and transport of raw material, goods and services.
The severe rains also slowed down road construction activity, which in turn curtailed demand for transportation, construction equipment and bitumen.
Weaker diesel demand growth in 2024 had reflected slower growth in economic activity, as growth rates in the industrial and agricultural sectors contracted compared to previous years.
Another important trend is that EVs are also cutting into diesel demand in the commercial vehicles segment, although this is not yet a significant factor in the overall picture.
EV adoption is particularly notable in major metropolitan cities and other rapidly emerging urban centres and in the logistics sector, where they are being preferred for short haul rides over diesel vans or light commercial vehicles.
EVs accounted for only 7.6 per cent of total vehicle sales in the financial year 2024-25, up 22.5 per cent year-on-year, but still far from the target of 30 per cent by 2030.
However, any significant drop in diesel demand will be a function of adoption of EV for long-haul trucks, which account for 32 per cent of the total CO2 emissions from the transport sector. Only 280 electric trucks were sold in 2024, reported NITI Aayog.
Trucks remain the largest diesel consumers. Moreover, truck sales grew 9.2 per cent year-on-year in the second quarter of 2025, driven in part by India’s target of 75 per cent farm mechanisation by 2047. This sales growth may outweigh the reduction in diesel demand due to EVs. Subsidies for electric tractors have seen some pilots, but demand is yet to take off.
Apart from diesel, petrol demand growth continued in the first half of 2025 at the same rate as in earlier years. Modest year-on-year growth of 1.3 per cent in passenger vehicle sales could temper future increases in petrol demand, however. This is a sharp decline from 7.5 per cent and 10 per cent growth rates in sales in the same period in 2024 and 2023.
Furthermore, EVs are proving to be cheaper to run than petrol for two- and three-wheelers, which may reduce the sale of petrol vehicles in cities that show policy support for EV adoption.
Steel and cement emissions continue to grow
As already noted, steel and cement were the only major sectors of India’s economy to see an increase in emissions growth in the first half of 2025.
While they were only responsible for around 12 per cent of India’s total CO2 emissions from fossil fuels and cement in 2024, they have been growing quickly, averaging 6 per cent a year for the past five years.
The growth in emissions accelerated in the first half of 2025, as cement output rose 10 per cent and steel output 7 per cent, far in excess of the growth in economic output overall.
Steel and cement growth accelerated further in July. A key demand driver is government infrastructure spending, which tripled from 2019 to 2024.
In the second quarter of 2025, the government’s capital expenditure increased 52 per cent year-on-year. albeit from a low base during last year’s elections. This signals strong growth in infrastructure.
The government is targeting domestic steel manufacturing capacity of 300m tonnes (Mt) per year by 2030, from 200Mt currently, under the National Steel Policy 2017, supported by financial incentives for firms that meet production targets for high quality steel.
The government also imposed tariffs on steel imports in April and stricter quality standards for imports in June, in order to boost domestic production.
Government policies such as Pradhan Mantri Awas Yojna – a “housing for all” initiative under which 30m houses are to be built by FY30 – is further expected to lift demand for steel and cement.
The automotive sector in India is expected to grow at a fast pace, with sales expected to reach 7.5m units for passenger vehicle and commercial vehicle segments from 5.1m units in 2023, in addition to rapid growth in electric vehicles. This can be expected to be another key driver for growth of the steel sector, as 900 kg of steel is used per vehicle.
Without stringent energy efficiency measures and the adoption of cleaner fuel, the expected growth in steel and cement production could drive significant emissions growth from the sector.
Power-sector emissions could peak before 2030
Looking beyond this year, the analysis shows that CO2 from India’s power sector could peak before 2030, having previously been the main driver of emissions growth.
To date, India’s clean-energy additions have been lagging behind the growth in total electricity demand, meaning fossil-fuel demand and emissions from the sector have continued to rise.
However, this dynamic looks likely to change. In 2021, India set a target of having 500GW of non-fossil power generation capacity in place by 2030. Progress was slow at first, so meeting the target implies a substantial acceleration in clean-energy additions.
The country has been laying the groundwork for such an acceleration.
There was 234GW of renewable capacity in the pipeline as of April 2025, according to the Ministry of New and Renewable Energy. This includes 169GW already awarded contracts, of which 145GW is under construction, and an additional 65GW put out to tender. There is also 5.2GW of new nuclear capacity under construction.
If all of this is commissioned by 2030, then total non-fossil capacity would increase to 482GW, from 243GW at the end of June 2025, leaving a gap of just 18GW to be filled with new projects.
When the non-fossil capacity target was set in 2021, CREA assessed that the target would suffice to peak demand for coal in power generation before 2030. This assessment remains valid and is reinforced by the latest Central Electricity Authority (CEA) projection for the country’s “optimal power mix” in 2030, shown in the figure below.
Electricity generation by fuel, TWh per year. Source: Historical generation from NITI, projection for the fiscal year 2029-30 from CEA. The trajectories from the latest data to 2029-30 are based on assuming steady annual growth rates for generation from each technology. The CEA projection is aligned with the target of reaching 500GW non-fossil capacity by the end of 2030.
In the CEA’s projection, the share of non-fossil power generation rises to 44 per cent in the 2029-30 fiscal year, up from 25 per cent in 2024-25. From 2025 to 2030, power demand growth, averaging 6 per cent per year, is entirely covered from clean sources.
To accomplish this, the growth in non-fossil power generation would need to accelerate over time, meaning that towards the end of the decade, the growth in clean power supply would clearly outstrip demand growth overall – and so power generation from fossil fuels would fall.
While coal-power generation is expected to flatline, large amounts of new coal-power capacity is still being planned, because of the expected growth in peak electricity demand.
The post-Covid increase in electricity demand has given rise to a wave of new coal power plant proposals. Recent plans from the government target an increase in coal-power capacity by another 80-100GW by 2030-32, with 35GW already under construction as of July 2025.
The rationale for this is the increase in peak electricity loads, associated in particular with worsening heatwaves and growing use of air conditioning. The increase might yet prove unneeded.
Analysis by CREA shows that solar and wind are making an increasing contribution to meeting peak loads. This contribution will increase with the roll-out of solar power with integrated battery storage, the cost of which fell by 50-60 per cent from 2023 to 2025.
The latest auction held in India saw solar power with battery storage bidding at prices, per unit of electricity generation, that were lower than the cost of new coal power.
This creates the opportunity to accelerate the decarbonisation of India’s power sector, by reducing the need for thermal power capacity.
The clean-energy buildout has made it possible for India to peak its power-sector emissions within the next few years, if contracted projects are built, clean-energy growth is maintained or accelerated beyond 2030 and demand growth remains within the government’s projections.
This would be a major turning point, as the power sector has been responsible for half of India’s recent emissions growth. In order to peak its emissions overall, however, India would still need to take further action to address CO2 from industry and transport.
With the end-of-September 2025 deadline nearing, India has yet to publish its international climate pledge (nationally determined contribution, NDC) for 2035 under the Paris Agreement, meaning its future emissions path, in the decades up to its 2070 net-zero goal, remains particularly uncertain.
The country is expected to easily surpass the headline climate target from its previous NDC, of cutting the emissions intensity of its economy to 45 per cent below 2005 levels by 2030. As such, this goal is “unlikely to drive real world emission reductions”, according to Climate Action Tracker.
In July of this year, it met a 2030 target for 50 per cent of installed power generating capacity to be from non-fossil sources, five years early.
About the data
This analysis is based on official monthly data for fuel consumption, industrial production and power generation from different ministries and government institutes.
Coal consumption in thermal power plants is taken from the monthly reports downloaded from the National Power Portal of the Ministry of Power. The data is compiled for the period January 2019 until June 2025. Power generation and capacity by technology and fuel on a monthly basis are sourced from the NITI data portal.
Coal use at steel and cement plants, as well as process emissions from cement production, are estimated using production indices from the Index of Eight Core Industries released monthly by the Office of Economic Adviser, assuming that changes in emissions follow production volumes.
These production indices were used to scale coal use by the sectors in 2022. To form a basis for using the indices, monthly coal consumption data for 2022 was constructed for the sectors using the annual total coal consumption reported in IEA World Energy Balances and monthly production data in a paper by Robbie Andrew, on monthly CO2 emission accounting for India.
Annual cement process emissions up to 2024 were also taken from Robbie Andrew’s work and scaled using the production indices. This approach better approximated changes in energy use and emissions reported in the IEA World Energy Balances, than did the amounts of coal reported to have been dispatched to the sectors, showing that production volumes are the dominant driver of short-term changes in emissions.
For other sectors, including aluminium, auto, chemical and petrochemical, paper and plywood, pharmaceutical, graphite electrode, sugar, textile, mining, traders and others, coal consumption is estimated based on data on despatch of domestic and imported coal to end users from statistical reports and monthly reports by the Ministry of Coal, as consumption data is not available.
The difference between consumption and dispatch is stock changes, which are estimated by assuming that the changes in coal inventories at end user facilities mirror those at coal mines, with end user inventories excluding power, steel and cement assumed to be 70 per cent of those at coal mines, based on comparisons between our data and the IEA World Energy Balances.
Stock changes at mines are estimated as the difference between production at and despatch from coal mines, as reported by the Ministry of Coal.
In the case of the second quarter of the year 2025, data on domestic coal has been taken from the monthly reports by the Ministry of Coal. The regular data releases on coal imports have not taken place for the second quarter of 2025, for unknown reasons, so data was taken from commercial data providers Coal Hub and mjunction services ltd.
Product-wise petroleum product consumption data, as well as gas use by sector, was downloaded from the Petroleum Planning and Analysis Cell of the Ministry of Petroleum & Natural Gas.
As the fuel dispatch and consumption data is reported as physical volumes, calorific values are taken from IEA’s World Energy Balance and CO2 emission factors from 2006 IPCC Guidelines for National Greenhouse Gas Inventories.
Calorific values are assigned separately to different fuel types, including domestic and imported coal, anthracite and coke, as well as petrol, diesel and several other oil products.
This story was published with permission from Carbon Brief.
