When the Strait of Hormuz was disrupted in 2026, a return to coal seemed inevitable. Instead, renewable energy filled the gap—revealing a deeper shift in how the world responds to energy crises.

When the Strait of Hormuz was blocked in early 2026, the world braced for an energy crisis. The narrow waterway is one of the most critical routes for global fuel transport, carrying nearly 19% of the world’s liquefied natural gas. As shipments were disrupted, a familiar expectation took hold: countries would fall back on coal.

That assumption was rooted in history. In previous crises, when gas supplies became uncertain or expensive, coal often filled the gap. This time, many expected the same pattern to repeat.

But it didn’t.

According to an analysis by the Centre for Research on Energy and Clean Air (CREA), global fossil fuel power generation fell by around 1% in March 2026 compared to the previous year. Gas-fired power dropped more sharply, by 4%, while coal generation remained largely flat.

Hormuz Crisis and Clean Energy Shift

The CREA analysis, which draws on near-real-time electricity data covering major power markets including China, the United States, the European Union, and India, represents around 87% of global coal power and over 60% of gas power. In the context of a global disruption, even a modest decline signals something more structural: the expected “return to coal” did not materialise.

The explanation lies in a shift that has been building quietly over the past decade—the rapid expansion of renewable energy.

In March 2026, increases in solar and wind played a decisive role in offsetting the drop in fossil fuels. Solar generation rose by 14%, while wind increased by 8%, with hydropower also contributing modest gains. Together, these sources absorbed the shortfall without pushing systems back toward coal.

“The record growth in global clean power generation, particularly solar and wind, has helped ease the impact of the latest fossil fuel crisis,” said Lauri Myllyvirta, Lead Analyst at CREA. “The increase in clean electricity offset the fall in gas-fired power generation following the Hormuz blockade, preventing a jump in coal-fired power generation.”

Outside China, coal-fired generation fell by 3.5%, while gas declined by 4%. Major economies—including the United States, India, the European Union, Turkey, and South Africa—recorded reductions in coal-based electricity. This directly challenges the long-standing assumption that fossil fuels serve as the default backup during crises.

The scale of renewable growth helps explain why.

In 2025 alone, the world added roughly 510 gigawatts of solar capacity and 160 gigawatts of wind. These additions are expected to generate about 1,100 terawatt-hours of electricity annually. By comparison, all the natural gas transported through the Strait of Hormuz in 2025 could produce around 590 terawatt-hours—roughly equivalent to France’s total power generation.

In effect, the renewable capacity added in a single year now produces nearly twice the electricity linked to one of the world’s most strategic fossil fuel routes. The implications are structural, not temporary.

Further evidence comes from coal transport. Seaborne coal shipments fell by 3% in March 2026, reaching their lowest levels since 2021. China and India, the world’s largest coal importers, saw a 9% drop in shipments, while countries such as Turkey and Vietnam also recorded declines.

Coal did not step in to fill the gap, in part because it could not. In many markets, coal plants were already operating near their maximum capacity. With coal already heavily utilised—often because it had been cheaper than gas—there was limited room to increase output further.

Gas, by contrast, typically serves as a flexible buffer in power systems. When gas supplies were disrupted, that flexibility was constrained. Renewable energy, rather than coal, filled the resulting gap.

At the same time, rising fossil fuel prices have strengthened the economic case for clean energy, discouraging new investment in coal.

This pattern has precedent. When Russia reduced gas exports to Europe, there were similar fears of a coal resurgence. While coal use rose briefly, the longer-term response was an acceleration of renewable deployment, leading to a sustained decline in emissions. The Hormuz disruption appears to be reinforcing that trajectory rather than reversing it.

At the country level, the trend is largely consistent. The most significant declines in coal power generation were recorded in the United States, India, South Africa, Turkey, Germany, and the Netherlands. In many cases, the expansion of solar power was the primary driver, supported by improvements in hydropower and nuclear generation.

There were exceptions. Japan and South Korea saw increases in coal use due to weaker nuclear output, while parts of coastal China temporarily shifted from gas to coal amid high gas prices. Even so, overall coal generation in China remained below 2024 levels, underscoring the broader direction of change.

The crisis has also triggered policy responses aligned with long-term transition goals. France is accelerating electrification across key sectors. Egypt plans to add 2,500 megawatts of renewable capacity. India has announced annual bids for 50 gigawatts of renewable energy. Indonesia is pursuing a 100-gigawatt solar vision, while Turkey has pledged $80 billion in renewable investments by 2035. Vietnam, meanwhile, is planning to phase out coal-fired plants in new energy projects after 2030.

These moves suggest that the response to disruption is not a return to older systems, but a faster shift toward new ones. The findings from CREA point to a deeper transition already underway—one in which clean energy is no longer supplementary, but central to energy security.

For decades, fossil fuels were seen as the backbone of energy security—reliable, scalable, and indispensable during crises. That assumption is now being tested. Renewable energy is increasingly demonstrating its ability to stabilise supply during periods of disruption.

The idea of a “coal comeback” may have made for compelling headlines, but the data tells a different story. Instead of turning back, the global energy system appears to be moving forward.

The Hormuz crisis may ultimately be remembered not as a moment of regression, but as an inflection point—one that revealed how far the transition to clean energy has already progressed, and how it may accelerate in the years ahead.

India’s energy transition is often framed as a technological leap—a race to install solar panels, wind turbines, and battery storage at unprecedented scale. But beneath this visible transformation lies a quieter, more decisive battleground: finance.

A new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) suggests that India’s ambition to reach 500 GW of renewable capacity by 2030 and 60% non-fossil fuel energy in its overall mix by 2035 will depend less on engineering breakthroughs and more on how effectively the country mobilises capital.

The Scale of India’s Energy Transition

The numbers alone reveal the magnitude of the challenge.

Annual investments in renewables, storage, and transmission are projected to rise from around $68 billion by 2032 to $145 billion by 2035—more than doubling within just three years.

This is not just an infrastructure expansion; it is a financial transformation. Renewable assets are capital-intensive and long-lived, requiring stable, long-term funding mechanisms rather than short-term capital flows.

“The power sector is already among the largest borrowers in India’s domestic debt markets, and this role is likely to expand as investments accelerate. In this context, transition planning is, fundamentally, a question of debt market planning. The availability, tenor and cost of debt will decide how fast capacity can be added — and who gets left behind,” says Kevin Leung, Sustainable Finance Analyst, Debt Markets, IEEFA – Europe, and a contributing author of the report.

India’s Energy Transition: A Structural Shift in Power Economics

What makes this transition particularly complex is that it is not occurring on a level playing field.

The report finds that financial markets are already structurally favouring renewable energy over thermal power. Renewable platforms benefit from zero fuel costs, stronger margins, and greater access to global capital. Thermal assets, by contrast, are increasingly being pushed out of international financing channels.

This divergence is visible even within the same corporate groups.

“Adani Green Energy Limited consistently outperforms Adani Power on EBITDA margins within the same corporate group. Similarly, NTPC Green outperforms NTPC’s legacy thermal operations. These are not cyclical differences. They reflect a structural shift in the economics of power generation that will compound over time as renewable portfolios mature and generate stable, contracted cash flows,” says Soni Tiwari, Energy Finance Analyst at IEEFA.

The implication is clear: the transition is not just about adding clean capacity—it is about a reallocation of financial power within the energy sector.

Energy Security Meets Geopolitics

India’s urgency is shaped not only by climate goals but also by geopolitical realities.

The country remains heavily dependent on imported fossil fuels, including crude oil and liquefied natural gas. This dependence exposes the economy to global price shocks and supply disruptions, making the transition to domestic renewable energy a question of national energy sovereignty.

In this context, clean energy is no longer just an environmental imperative—it is a strategic necessity.

The Debt Market Bottleneck

Despite the scale of required investment, India’s financial system is not yet fully equipped to support the transition.

While the country’s corporate bond market saw issuances exceeding $500 billion in 2025, it remains relatively shallow and dominated by public sector entities. Power utilities still rely on loans for nearly 80% of their debt, indicating a limited role for bond markets.

This imbalance creates a structural constraint. Renewable energy projects require long-term, low-cost financing—conditions that bond markets are typically better suited to provide.

At the same time, over-reliance on international capital introduces new vulnerabilities.

Global capital flows can be volatile, particularly during periods of geopolitical instability. Sudden capital withdrawals could disrupt funding for large-scale energy projects, creating what analysts describe as a “transition investment flight risk.”

The NTPC Factor

At the centre of this financial ecosystem stands NTPC, India’s largest power utility.

With a planned capital expenditure of ₹7 trillion (around $80 billion) through FY2032 and a credit profile aligned with sovereign ratings, NTPC is uniquely positioned to anchor the transition.

“It is uniquely positioned to anchor large-scale, low-cost financing for the power sector’s shift to clean energy. NTPC’s INR7 trillion (USD80 billion) capex plan through FY2032 makes it the single most consequential capital allocator in the sector. If NTPC can demonstrate credible transition to a clean energy company, it would facilitate broader capital flows via a coherent transition finance agenda alongside other catalytic efforts,” says Saurabh Trivedi, Lead Specialist at IEEFA.

The company’s trajectory could shape not just its own future, but the financial architecture of India’s energy transition.

Winners, Losers, and the Transition Divide

The report also highlights an emerging divide within the power sector.

Stronger, well-capitalised companies—particularly those with renewable portfolios—are likely to benefit from easier access to finance. In contrast, financially constrained players face a dual challenge: limited ability to invest in decarbonisation and shrinking access to funding.

State-owned enterprises, backed by implicit government support, enjoy greater refinancing flexibility. Private players without such backing may struggle to keep pace.

This creates a risk of asymmetric transition, where only certain segments of the industry are able to adapt effectively.

A Financial System in Transition

Ultimately, the energy transition is not just about replacing fossil fuels with renewables—it is about reshaping the financial system that underpins the energy economy.

Building a resilient, domestically anchored capital base—supported by pension funds, insurers, and long-term institutional investors—will be critical. Without it, India risks remaining dependent on volatile global capital flows.

At the same time, expanding the role of bond markets could unlock new pathways for financing large-scale infrastructure.

Beyond Technology: The Real Transition

The narrative of India’s clean energy future often centres on megawatts installed and emissions reduced. But the deeper story is one of capital—how it is raised, allocated, and sustained over decades.

The IEEFA report makes one point unmistakably clear:India’s energy transition will not be won in power plants alone. It will be decided in balance sheets, debt markets, and financial institutions.

And as the required investment climbs toward $145 billion annually, the question is no longer whether India can build a clean energy system—but whether it can finance it.

India’s non-fossil power capacity is set to reach 70% by 2035-36, driven by rapid solar expansion, but grid constraints, storage gaps and utilisation challenges could shape the energy transition.

India is preparing for one of the most dramatic transformations in its energy sector, with the Central Electricity Authority outlining a future where clean energy dominates installed capacity but fossil fuels continue to underpin supply reliability.

The National Generation Adequacy Plan (2026-27 to 2035-36) presents the most detailed roadmap yet of how India’s electricity system will evolve over the next decade. It projects that India’s installed power capacity will reach 1,121 GW by 2035-36, with 70% (786 GW) coming from non-fossil sources, signalling a structural shift in the country’s energy mix.

At the same time, the report highlights a more complex reality: capacity expansion alone will not define the transition—utilisation, storage, and grid readiness will.

India Power Capacity 2035-36 to Cross 1,100 GW

India’s electricity system is expected to nearly double in scale over the next decade.

According to the report, net electricity generation is projected to rise from around 1,725 billion units today to 3,450 billion units by 2035-36, reflecting the country’s rapid economic growth and electrification push.

Solar energy is set to emerge as the dominant force in India’s power mix. Installed solar capacity alone is expected to exceed 500 GW, accounting for nearly 45% of total capacity, making it the single largest contributor to India’s energy basket.

The detailed breakdown of projected capacity includes:

• 315 GW coal
• 509 GW solar
• 155 GW wind
• 78 GW large hydro
• 20 GW gas
• 22 GW nuclear

These figures underline a system where renewables dominate capacity, but conventional sources remain critical to stability.

India Power Capacity 2035-36 vs Actual Generation Gap

One of the most important insights from the report is the divergence between installed capacity and actual electricity generation.

Despite renewables making up 70% of capacity, coal is expected to remain the backbone of electricity supply. The report projects coal will still account for 51% of total electricity generation (1,819 BU), while solar will contribute around 27% (984 BU).

This gap reflects the intermittent nature of renewable energy and the continued need for firm, dispatchable power.

As the report notes, “the source of firm power at present is predominantly coal-based generation.”

This highlights a key transition challenge: while India can rapidly build renewable capacity, replacing coal’s role in ensuring round-the-clock supply will require deeper systemic changes.

India Power Capacity 2035-36 Faces Grid Bottlenecks

While India’s renewable expansion has been rapid, the system’s ability to absorb this capacity remains constrained.

A major concern flagged in the analysis is the issue of stranded renewable capacity—power that is generated but cannot be transmitted due to grid limitations.

Vibhuti Garg, Director South Asia at the Institute for Energy Economics and Financial Analysis, said: “It is encouraging to see the national generation adequacy plan taking shape. India has made remarkable progress in expanding renewable energy capacity, with clean sources now accounting for more than 50% of installed capacity.

However, the real test lies not in capacity addition, but in how effectively this generation is utilised. Currently, over 37 GW of renewable energy capacity remains stranded—highlighting gaps in planning, integration, and grid readiness.

This underscores the urgent need to shift focus from merely adding capacity to ensuring efficient evacuation and utilisation. Strengthening transmission infrastructure and aligning it with demand centres is critical. As supply and demand increasingly diverge geographically, coordinated planning becomes essential.”

The report also notes that renewable energy generation is becoming more geographically dispersed, increasing the need for robust transmission networks to connect generation hubs with consumption centres.

India Power Capacity 2035-36 Needs Massive Storage Push

Energy storage emerges as the single most critical enabler of India’s clean energy transition.

The plan estimates that India will require 174 GW / 888 GWh of energy storage capacity by 2035-36, including battery storage and pumped hydro.

However, the current pipeline is far from sufficient:

• Only 10.6 GW of battery storage is under construction
• Additional capacity remains in tendering or early planning stages

This gap between projected need and current deployment highlights a major financing and policy challenge.

The report also emphasises that solar-plus-storage systems are emerging as an alternative, particularly for meeting peak demand during non-solar hours, but are yet to fully replace coal-based baseload generation.

India Power Capacity 2035-36 and Energy Security

The timing of the plan is significant, coming amid global energy market disruptions and geopolitical tensions.

Vibhuti Garg noted:“At a time when India remains exposed to global fuel supply disruptions due to geopolitical tensions, accelerating renewable energy integration is not just a climate imperative—it is an economic and energy security necessity.”

The report positions renewable energy not just as a climate solution, but as a strategic tool for reducing dependence on imported fuels.

EVs and Data Centres as New Demand Drivers

The plan also identifies electric vehicles and data centres as emerging sources of electricity demand.

These loads are expected to be geographically concentrated, requiring careful coordination between energy supply and demand planning.

Vibhuti Garg added: “This challenge will intensify with the rise of new demand drivers such as electric vehicles and data centres. These loads are often geographically concentrated, making it even more important to strategically plan clean energy supply in tandem with demand clusters.”

India’s power sector is entering a defining decade.

The National Generation Adequacy Plan makes it clear that the country is on track to build one of the world’s largest clean energy systems. But it also underscores that capacity alone is not enough.

The real transition will depend on:

• Grid infrastructure
• Energy storage deployment
• Demand-side planning
• Policy alignment with emerging technologies

As the report emphasises, the goal is not just to expand capacity, but to ensure a reliable, resilient, and cost-effective power system capable of meeting India’s rapidly growing electricity demand.