India’s Industries Accelerate Shift to RE for Cost Savings and Sustainability

India’s steel, cement, and aluminium industries are rapidly shifting to renewable energy to lower costs and reduce emissions.

A report by Ember, titled, 'RE-powering India’s Heavy Industries: 20 GW Today, 24/7 Tomorrow,' outlines how these key industrial sectors can capitalize on India’s green energy open-access regime to enhance profitability and sustainability. The report highlights the potential for large-scale solar adoption while addressing the regulatory, economic, and technical challenges that industries must navigate during this transition.

"The green energy open access market offers a 20 GW profitable opportunity for the steel, cement, and aluminium sectors across various states. However, two key challenges hinder its full potential. First, industrial facilities remain largely dependent on low-cost captive coal power, limiting the adoption of renewables. Second, while a portion of their electricity demand is met through the expensive grid, which could be more cost-effectively replaced with renewable energy, multiple open access surcharges on renewable power significantly reduce the financial benefits of this transition," said the report.

The steel sector, accounting for 9.4 GW of this opportunity, stands to gain the most from the shift. Electric arc furnace (EAF) units, in particular, can cut production costs by up to 10 Percent by transitioning to solar power. In states such as Chhattisgarh, Karnataka, and West Bengal, companies could save between INR 0.5–1.7 per kWh through open-access solar procurement. This shift could also lead to significant emission reductions, cutting 15 million tonnes of CO₂ annually and lowering the emission intensity of steel production.

Meanwhile, the cement and aluminium industries collectively hold an 11 GW renewable energy potential. While cement manufacturers could reduce operational expenses by 2–5 Percent, aluminium remains more reliant on captive coal. However, states such as Odisha and Chhattisgarh, which account for 40 Percent of the total 20 GW opportunity, are rapidly positioning themselves as green manufacturing hubs due to favorable policy incentives, including waived open-access charges.

Despite these opportunities, several regulatory and financial barriers need to be addressed. One of the key hurdles is high green tariff pricing, which often exceeds the average power purchase cost (APPC) of DISCOMs by INR 0.2–1 per kWh. Without clear guidelines for time- and location-based tracking, these green tariffs may struggle to meet future greenhouse gas protocol standards, potentially undermining emission reduction claims. Further, state-level regulatory inconsistencies are complicating the implementation of Green Energy Open Access (GEOA) Rules (2022). While some states, such as Odisha and Chhattisgarh, actively promote open-access solar adoption, others, like Gujarat, have imposed restrictions on group-captive models, limiting corporate participation. In Karnataka, legal disputes have slowed the progress of new renewable procurement models, adding uncertainty to long-term planning for industries.

DISCOMs’ financial concerns also present a major roadblock. The shift of industrial consumers to renewable energy could widen DISCOM revenue losses by 53–100 Percent, leading to political resistance. The challenge remains in finding a balanced approach where industrial cost savings do not severely impact DISCOM viability, necessitating further policy reforms.

Achieving round-the-clock renewable energy supply remains a significant challenge due to high battery storage costs, which account for 60 Percent of 24/7 renewable energy expenses. This pushes the cost premium to 3.5 times the standard solar tariff, making full renewable integration an expensive proposition. Transitioning from 50 Percent to 80 Percent renewable energy increases costs by 1.4 times, while achieving 100 Percent renewable power requires oversized infrastructure, doubling costs. Advanced demand flexibility mechanisms and real-time grid integration technologies are essential to overcoming these hurdles.

India’s regulatory framework is evolving to support greater renewable adoption in heavy industries. Renewable Purchase Obligations (RPOs) now mandate that at least 43 Percent of captive industrial power consumption must come from renewables by 2030. While this has created a strong incentive for industries to transition, challenges such as the exclusion of waste heat recovery systems from compliance calculations need to be resolved.

Several states have already taken proactive steps to support industrial renewable adoption. Odisha and Chhattisgarh have introduced waivers on transmission and wheeling charges, attracting over USD 2.3 billion in green investments for steel manufacturing clusters. Meanwhile, Karnataka offers a 50 Percent cross-subsidy surcharge waiver, although recent legal disputes over retroactive tariff changes have raised concerns among investors.

Corporations are also restructuring their procurement models to adapt to the evolving landscape. Third-party solar procurement offers immediate cost savings but remains subject to additional surcharges. On the other hand, captive and group-captive models provide long-term financial benefits, as seen in Tata Steel’s 1.5 GW solar investment strategy. These models offer industrial consumers greater control over pricing and power availability, making them a preferred choice for long-term decarbonization plans.

India’s transition to renewable-powered heavy industries is not just a domestic issue but also a global competitiveness factor. The steel sector, in particular, faces rising competition from China and Vietnam, where lower production costs put Indian manufacturers at a disadvantage. By adopting renewable energy, Indian steelmakers could offset INR 200 million annually in operational expenses for a 1,000 TPD plant, improving their ability to compete in export markets.

Technological innovation will also play a crucial role in scaling this transition. Hybrid renewable projects that integrate solar and wind generation are emerging as a cost-effective solution, offering tariffs as low as INR 3.2 per kWh. Additionally, green hydrogen pilot projects are gaining traction as a potential replacement for fossil fuels in high-temperature industrial processes such as blast furnace-basic oxygen furnace (BF-BOF) steelmaking.

Industry experts emphasize that targeted policy changes and technological advancements will be critical in accelerating the renewable transition. Duttatreya Das from Ember highlights that Odisha and Chhattisgarh’s development of green industrial parks positions India as a low-carbon manufacturing leader. Meanwhile, Labanya Prakash Jena from IEEFA underscores the urgent need for policy reforms to unlock USD 20 billion in climate finance for India’s heavy industries. Killian Daly from EnergyTag stresses that 24/7 renewable power adoption requires innovation in battery storage and demand management systems to ensure reliability and cost-effectiveness.

India’s heavy industries stand at a crucial juncture. Companies that embrace renewables will not only reduce operational costs and emissions but also enhance global competitiveness in an era of stricter carbon regulations. With the right policy interventions, corporate investments, and technological advancements, the sector could unlock USD 12 billion in annual savings by 2030. However, addressing DISCOM revenue losses, standardizing green tariffs, and improving grid integration remains critical for scaling this transition successfully.

India’s push toward a greener, more cost-efficient industrial sector will be a defining factor in its journey toward becoming a global renewable energy leader while securing economic growth and energy security.