Indian State Electricity Distributors Ink Long-Term Coal Contracts to Address Evening Demand Gaps

India’s state electricity distribution companies are finalizing long-term power purchase agreements (PPAs) with coal-fired power plants to cover anticipated electricity demand surges in the evening hours, even as the country continues to push for renewable energy targets. The contracts, finalized in late 2025, reflect a shift toward ensuring grid stability during peak consumption periods when solar and wind generation typically wane.

The move highlights a growing reliance on thermal power to bridge the gap between supply and demand during critical hours of the day, despite national policy frameworks emphasizing the expansion of non-fossil-fuel sources. Several state electricity boards have confirmed signing multi-year agreements that prioritize baseload and semi-peak generation from coal-based plants.

Demand Management Strategies Under Scrutiny

As evening demand continues to outpace daytime output from intermittent renewables, system operators are prioritizing reliability over emissions reductions in the short term. The contracts, which span a variety of states, are structured to lock in supply during peak periods, often between 6 p.m. and 10 p.m., when residential and industrial usage peaks.

While India remains committed to its renewable energy goals, which include achieving 500 GW of installed by 2030, the timing of generation from these sources does not always align with the nation’s load curve. This mismatch has prompted distribution companies to seek predictable power sources that can be dispatched during periods of high demand.

Coal-Based Plants See Renewed Contract Interest

A number of older and newly commissioned coal-fired power plants have secured these PPAs, with terms ranging from three to five years. These agreements typically include fixed pricing structures to insulate both buyers and sellers from market volatility. The power purchase agreements are being finalized in line with regulatory guidelines that allow for adjustments based on fuel prices and performance metrics.

The contracts are being negotiated under the umbrella of state-level electricity regulatory commissions, which are tasked with balancing affordability, reliability, and environmental sustainability. While the long-term PPAs ensure a stable revenue stream for coal plant operators, they also raise questions about the pace of India’s transition to cleaner energy sources.

Industry observers note that the recent surge in coal-based procurement reflects a broader challenge in managing the intermittency of renewable sources without robust storage infrastructure. Analysts project that as long as battery storage and demand-side management solutions remain limited in scale, thermal power will continue to play a central role in maintaining grid stability.

The shift in procurement strategy underscores the complexity of balancing India’s energy transition with the immediate needs of an expanding and electrified economy. With evening demand expected to grow alongside urbanization and industrial activity, the reliance on coal for short-term supply security is likely to persist in certain states.