India's clean-energy surge holds power-sector emissions flat for two years

Carbon dioxide emissions from India's power sector were no higher in the first half of 2026 than they were two years earlier, as a record expansion of solar and wind absorbed the entire increase in electricity demand, according to analysis for Carbon Brief published on September 17.

It is the first time in more than 50 years that India's coal-fired power generation has failed to grow over a two-year period while electricity demand was still rising, wrote Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air (CREA), and Anubha Aggarwal, the think-tank's India analyst.

The flat line hides a split. Power-sector emissions fell 2.2% year on year in the first half of 2025 and then rose 2.3% in the same period of 2026, leaving the two-year change at zero. Emissions from oil and gas consumption fell 7% year on year, extending a decline that began last year. But steel and cement emissions grew 8% and now account for 23% of all of India's CO2.

The net result is that India's total emissions still rose, by 3.7% year on year in the first half of 2026 - the clean-energy build-out has neutralised the power sector without yet touching heavy industry.

The finding extends a trend bne IntelliNews reported in January, when CREA's previous assessment found coal-fired generation falling in India for the first time in five decades.

Clean power covers all the growth

India's total power generation rose 7% between the first half of 2024 and the first half of 2026, an increase of 63 terawatt hours (TWh) - roughly the entire annual electricity consumption of Switzerland or Singapore.

Every unit of that was covered by non-fossil sources, and then some. Solar generation grew by 44TWh over the two years, wind by 13TWh, hydro by 8TWh and nuclear by 7TWh, a combined 70TWh - more than the net increase in demand.

Behind the output came the capacity: 77GW of new solar, 11GW of wind, 5GW of hydro and 0.6GW of nuclear in two years. Solar dominates, but the other non-fossil sources together still delivered 40% of the overall rise in generation. For scale, China's combined nuclear, wind and solar output rose by 485TWh in 2025 alone.

India added a record 52,537 MW of generating capacity in FY26, with renewables leading the expansion, and analysts have argued since the spring that the country's renewable surge has hit critical mass.

CREA's figures suggest the trend has further to run: output from newly commissioned clean capacity has run ahead of average demand growth for 18 months.

Fossil-fuel generators, meanwhile, added 8.5GW of new coal capacity into a market that was not growing, cutting running hours across the fleet and pushing costs onto electricity consumers.

One reason demand rose at all this year was weather. El Nino delayed the monsoon and intensified heatwaves, driving up cooling load - the same dynamic that saw India lean harder on coal in May.

Gujarat leads, the states diverge

The decline in fossil-fuel generation was concentrated in a handful of states rather than spread across the country.

Gujarat recorded both the largest fall in fossil generation and the largest expansion of clean power. Rajasthan and Tamil Nadu came next on clean-power growth and also cut fossil output.

Several other states - Madhya Pradesh, West Bengal and Punjab - burned less coal only because they imported more power from elsewhere, not because they built clean capacity.

Karnataka and Andhra Pradesh added clean generation faster than their own demand grew, which is what kept national fossil generation flat, but exported much of the surplus and saw their own fossil output rise. Maharashtra and Telangana, the two states with the biggest increases in demand, came close to matching that growth with clean power.

Oil and gas fall for a second year

India's oil consumption fell 1.3% year on year in the first half of 2026, a slight acceleration on the 0.7% decline of a year earlier, and the second consecutive annual fall after half a century of near-continuous growth interrupted only by Covid-19.

Transport fuels are not the reason. Diesel consumption growth accelerated to 4.1% from 1.8%, helped by heavier freight movements and diesel irrigation during the delayed monsoon, while petrol returned to growth at 6.9% after a flat 2025. A jump in ethanol blending took a full percentage point off petrol demand growth; India hit its 20% blending target in 2025-26, five years early.

The decline came from everything else. Liquefied petroleum gas (LPG) consumption contracted 7% after growing 5.7% a year earlier, amid the disruption to global LPG markets that followed the Hormuz crisis. Petcoke fell 9.9%, more than reversing a 9.3% rise, as higher prices pushed cement makers back to coal. Naphtha demand shrank as import prices nearly doubled and domestic prices rose about 60%, forcing petrochemical plants to cut operating rates. Bitumen stayed weak on slow road construction.

Aviation fuel growth slowed to 2% from 5%, coinciding with the airspace closures, cancellations and higher fuel prices that followed the closure of the Strait of Hormuz, a shock that exposed the vulnerability of global trade far beyond the oil price.

Some of the substitution went the wrong way for air quality. Higher light diesel oil prices and the LPG shortage pushed industrial users back to furnace oil in boilers and heaters, and state governments including Delhi NCR, Rajasthan, Tamil Nadu, Gujarat and Maharashtra temporarily lifted bans on dirtier fuels. The government authorised the hospitality industry to burn coal, refuse-derived pellets, biomass and kerosene for a month when gas ran short in March and April.

Flat oil and gas demand did have one benefit: it blunted the impact of the Hormuz crisis on India's trade balance. Imported coal use for power fell 38% over the two years and gas use 35%, cutting the country's exposure just as prices spiked.

Steel and cement pull the other way

Steel output grew 8% year on year in the first half of 2026 and cement 9%, supported by investment in real estate, particularly in the second quarter. Steel consumption grew faster than production, implying that inventories built up last year were run down.

Margins were squeezed throughout by expensive imported coking coal and the higher freight costs left by the Hormuz crisis. Cement prices are expected to return to levels last seen in the 2021-22 financial year, when Russia's gas cuts to Europe drove fossil-fuel prices sharply higher.

Outside power, steel and cement, coal consumption growth accelerated to 14% in the first half of 2026 from 3% a year earlier, as the LPG shortage prompted a switch to coal.

The underlying problem, CREA argues, is that Indian industry barely uses electricity. Electricity accounted for 17% of industrial energy consumption in 2023, the second-lowest share in the G20, below the world average on both level and rate of improvement. Until that changes, every increase in industrial output translates directly into more fossil-fuel burning.

Coal investment carries on regardless

None of this has slowed capital spending across the coal supply chain. Some 43GW of coal-fired capacity was under construction at the end of June, justified by the need to meet rising peak loads even as solar covers daytime peaks and storage begins to cover the evening.

Outside the power sector, the government wants capacity to process 100mn tonnes of coal a year through gasification within four years, to make fertiliser and plastics feedstock domestically. The technology is barely established in India: the only operational use is at Jindal Steel, which is reported to be using syngas in steelmaking.

In January the government designated domestic coking coal a "critical and strategic mineral", and miners and steelmakers are reported to be planning new washeries so it can be blended with imported coal. New coal mines are also planned.

Taken together, CREA warns, coal gasification, domestic coking coal and new mining capacity could lock coal into Indian industry for decades - even as India separately targets a 25% cut in CO2 per tonne of steel by 2025-26, mainly by reducing coal-based steelmaking.

What has to happen next

Keeping the clean-energy expansion going will require more than turbines and panels.

Transmission is the immediate bottleneck. Renewable projects totalling 5.3GW missed completion deadlines and are paying penalties to the grid operator to hold onto network access. Curtailment - clean power generated but wasted because the network cannot take it - has become a live issue, particularly for projects that depend on interstate transmission.

Coal plants also need to become more flexible so they can ramp down when renewable output is high. A flexibility plan for the coal fleet has been stuck for more than a year in regulatory bottlenecks, which is itself contributing to curtailment.

Storage is the other half of the answer. The National Electricity Plan calls for 82 gigawatt hours (GWh) of storage by 2026-27 and 411GWh by 2031-32. As of May 2026 the government had tendered around 272GWh, including 142GWh of pumped hydro and 133GWh of batteries, against installed capacity of just 7.5GWh of batteries and around 60GWh of pumped hydro. India is not alone in the turn to water batteries: global pumped storage passed 200GW last year.

The Central Electricity Authority has proposed that from June 2027 all new government-owned solar and wind projects carry mandatory two-hour battery storage - a policy China ran until early 2025 before scrapping it in favour of market-based approaches.

The direction of travel in the power sector is now clear enough. What CREA's numbers show is that India's emissions problem has moved: it is no longer mainly about electricity, and increasingly about a heavy industry that still runs on coal.