India's coal-fired power generation in May recorded its steepest decline in five years, falling 9.5% year-on-year to 113.3 billion kilowatt-hours (kWh), amid a rare drop in overall electricity demand and a surge in renewable energy output, according to a Reuters analysis of data from Grid India, the federal power grid regulator.

This marked the sharpest annual fall in coal-based power generation since June 2020, when the country was under a strict COVID-19 lockdown, Reuters reported.

Total electricity generation in May dropped by 5.3% from a year earlier to 160.4 billion kWh, with peak demand falling 8% year-on-year to 231 gigawatts (GW), largely due to milder temperatures, government officials said.

This is in contrast to May 2024, when peak demand touched 250 GW during a severe heatwave.

The data also showed that natural gas-fired power generation plummeted 46.5% to 2.78 billion kWh — the steepest drop since October 2022 — amid an increase in power supply from hydro and nuclear sources.

Industry experts attributed the decline to high prices making gas-based electricity less competitive, particularly as power demand softened.

“Demand from the power sector - typically strong during peak season - remained limited. Additionally, economic headwinds have weighed on non-power industries,” noted Indian coal trader I-Energy in a recent report.

The easing of fossil fuel consumption for electricity generation — especially in coal and LNG — comes as global benchmark prices for these fuels face mounting pressure.

Asian spot LNG prices have declined over 15% so far this year, while thermal coal prices have slumped to four-year lows amid weakened demand from top importers China and India.