Solar and batteries have beaten coal pricing in coal's game: Frequently asked questions

by Nikit Abhyankar, Amol Phadke and Ajay Shah.

We recently published three articles, triggered by the remarkable SECI tender for thermal-mimicking power, where solar power and batteries achieved a lower price than new coal:

1. Shah, Ajay. 2026. "Consequences of cheap electricity." Business Standard, October 12, 2026.
   This article examines how the rapidly falling costs of solar power and battery storage are transforming India's industrial landscape. The author highlights that India is emerging as a favorable location for energy costs compared to the US, creating new strategic advantages for energy-intensive sectors like green steel and aluminum.
2. Shah, Ajay, Nikit Abhyankar, and Amol Phadke. 2026. "A tipping point in Indian energy." Business Standard, September 27, 2026.
   This article examines how the rapidly falling costs of solar power and battery storage are driving a non-linear shift towards renewables in India. This transition, increasingly driven by economics rather than decree, has profound implications for national energy procurement, renewable energy investments, and the future viability of existing coal assets.
3. Phadke, Amol, Nikit Abhyankar, and Umed Paliwal. 2026. "Renewable Energy with Storage Can Match Coal's Reliability and Operating Profile at a Lower, Fixed Price: Evidence from India's Market Test." The Leap Blog, September 23, 2026.
   Despite dramatic declines in clean-energy costs, over $1 trillion in conventional plant investments is globally under consideration because fossil fuels are assumed essential for round-the-clock power. This article demonstrates how firm renewable power bundled with battery storage in India can now match coal's reliability at a lower, inflation-proof fixed price.

These articles generated substantial debate. This FAQ distils those discussions.

Q: Does the SECI Thermal Mimic tender lack an annual Demand Fulfilment Requirement (DFR), allowing excessive permissible non-compliance? The tender requires 15-minute block compliance. Generators must supply at least 90% of contracted capacity during six buyer-nominated peak hours, 70% during other non-solar hours, and 50–60% during solar hours. Shortfalls face a penalty of 1.5 times the contract tariff. The implicit 70% annual DFR deliberately mimics coal plants, which are backed down during solar hours to avoid variable costs. Increasing the DFR to 90% during solar and non-peak hours actually lowers the per-unit cost, as generators receive full payment during inexpensive solar hours (for example, see Paliwal et al. 2026, which assesses cost of achieving 90% annual DFR).

Q: Coal plant maintenance is schedulable based on system requirements. Are renewable energy (RE) shortfalls dictated by unpredictable weather, making them fundamentally less reliable? It is incorrect to assume coal outages are entirely planned. Central Electricity Authority (CEA) daily generation data over 20 years shows coal plants suffer 5–7% forced (unscheduled) outages, frequently during peak demand seasons. While solar and storage face monsoon challenges, their availability during peak non-monsoon seasons exceeds 90%. Moreover, fossil plant reliability is declining globally; capacity credits for gas plants in US markets have been downgraded below 70% due to correlated weather failures.

As an example, consider the CEA report for 12 October 2026. On this day, 12.33% of the 225.19 GW of monitored coal generation (i.e. 27.76 GW) went down. Of this, 5.58 GW was planned and 22.05 GW was not. That day, NLDC reported a 4.27 GW evening shortage at 19:00 and 15.45 GWh of energy shortage over the day. Words like coal and base load evoke something in our minds that is not quite a description of the reality.

Q: Are weather-related failures in renewable generation highly correlated, making fleet-level reliability impossible without massive overbuilds? Assessments of 100 Indian sites over 10 weather years demonstrate that geographic diversity significantly mitigates correlation (Paliwal et al. 2026, similar findings for the US, see Caldeira et al. 2018). A monsoon week does not uniformly eliminate generation across the entire subcontinent. Uncorrelated forced outages in RE plus storage can be managed using a standard reserve margin of 10–15%, identical to the reserve margins required to backstop discrete unit trips in coal fleets.

Q: What is the marginal cost of extra reliability from solar and storage? Does covering the worst hours result in an expensive leftover? Forcing a single solar and storage site to meet 100% of demand across all 8,760 hours of the year is an artificial constraint that inflates costs to roughly ₹9/kWh. No power grid demands 100% guaranteed output in every hour from a single plant. Using a portfolio approach with a 10% reserve margin, 24/7 clean power with 99.9% reliability costs under ₹6/kWh. The SECI auction discovered a firm renewable power price of ₹5.25–5.26/kWh, fixed for 25 years. With inflation, this fixed nominal tariff equates to roughly ₹3.79/kWh in real 2026 rupees.

Q: The ₹5.25/kWh product is not perfectly firm. Does it genuinely compare to coal? The SECI contract explicitly tests whether a resource can meet the dispatchability requirements the power grid actually needs, not a hypothetical flat load. Roughly 80% of existing Indian coal plants would fail to consistently meet the 15-minute availability profile enforced by the SECI tender. Recent competitively procured coal PPAs opened at ₹5.38–6.30/kWh. Because coal tariffs include escalating variable fuel costs, average new coal PPA prices could reach ₹7.4/kWh by 2050. The thermal-mimic tariff remains fixed at ₹5.25/kWh, avoiding fuel-price and freight cost inflation. The thermal-mimic price is 10 per cent cheaper than new coal.

Q: Do least-cost capacity expansion models indicate a need for new coal? No. Evaluating hundreds of thousands of resource-mix combinations across multiple weather years from 2030 to 2050 demonstrates that new coal is not cost-effective beyond the roughly 35 GW already under construction. Existing coal and wind assets will optimally backstop solar and storage.

Q: Should the electricity system be centrally planned to guarantee 100% supply-side reliability? Attempting to build hardware that solves for every eventual peak through central planning suffers from the socialist calculation problem. It is societally inefficient to build supply assets assuming perfectly inelastic demand. The SECI tender serves as a clarifying intellectual device demonstrating that solar and batteries can beat coal on its own terms. However, the future of electricity involves a price system with dynamically fluctuating intra-day prices. Price signals drive supply, storage and demand responses. The most important solution to evening shortages in a solar-heavy system is higher prices, not more batteries. High evening prices will prompt large-scale decentralised adjustments, such as modifying air-conditioning loads, shifting agricultural pumping, or discharging electric vehicles. Once the price system operates correctly, greater variation of supply within the day is permissible. Under these conditions, the case for coal base load vanishes, and the economic superiority of solar+batteries is accentuated.

We are grateful to Apoorva Bahadur, Rahul Tongia, Rohit Vijay, Ashwin Gambhir and Shantanu Dixit for valuable conversations.