CHENNAI: India’s steel, cement and aluminum industries, long tethered to coal-powered operations, are poised to tap into a 20 gigawatt (GW) solar energy market that promises both cost savings and a significant reduction in carbon emissions, according to a report released by Ember this week. Titled “Heavy Industries: $20 GW Today, 24/7 Tomorrow”, the study outlines how these sectors can profitably integrate renewable energy (RE) today while laying the groundwork for a fully renewable-powered future.
The report highlights a $20 GW open-access solar opportunity across India’s top-producing states, with steel leading the charge at 9.4 GW, followed by cement at 6.9 GW, and aluminum at 4.1 GW. This shift could slash emissions by 29 million tonnes annually—an impactful step toward India’s climate goals of reducing emission intensity by 45% from 2005 levels by 2030.
Cost-competitive transition
India’s industrial sector, which accounts for 607 million tonnes of direct CO2 emissions annually and consumes 595 terawatt-hours (42% of the nation’s electricity demand), has historically leaned on low-cost captive coal plants. Yet, the report reveals that open-access solar—where industries procure renewable power directly using the grid—offers a compelling financial case. For steelmakers using electric arc furnaces (EAF), switching to solar could cut production costs by up to 10%, while cement and aluminum see more modest gains due to their reliance on captive coal. “Cost-competitive, near-24/7 renewable energy will power the first wave of industrial decarbonization and redefine the future of corporate power purchases,” said Neshwin Rodrigues, Senior Energy Analyst for Asia at Ember. In states like Chhattisgarh and Odisha, which together account for 40% of this solar opportunity (8 GW), progressive policies such as waivers on transmission and cross-subsidy surcharges amplify these savings. For instance, a median-sized steel plant (1,000 tonnes per day) in Karnataka could save ₹200 million annually, roughly 2-5% of its revenue, by adopting solar.
The data shows regional disparities. In Chhattisgarh, open-access solar costs ₹3.5-4/kWh compared to grid tariffs of ₹5-6/kWh, yielding savings of ₹0.5-1.7/kWh. Meanwhile, Odisha’s push for green industrial parks signals a broader vision. “By integrating renewable power, states like Odisha and Chhattisgarh are well-positioned to transform into green manufacturing hubs,” noted Duttatreya Das, energy analyst for India at Ember.
Steel leads, aluminum lags
The steel sector, emitting 300 million tonnes of CO2 yearly, stands out as the most promising market. With India producing 144 million tonnes of steel in FY 2023-24—second only to China—its emission intensity of 2.54 tonnes of CO2 per tonne of crude steel exceeds the global average of 1.91 tonnes. The report pinpoints electric furnaces, reliant on expensive grid power (664-825 kWh/ton), as ripe for solar adoption. In top steel states like Odisha (2.9 GW) and Chhattisgarh (2.4 GW), 9.4 GW of solar could reduce emissions by 15 million tonnes annually.
Cement, with an annual output of 433 million tonnes and emissions of 285 million tonnes of CO2, shows promise but faces hurdles. Its electricity mix—40% captive coal, 10% waste heat recovery, and 50% grid—limits savings, with third-party solar often falling short of a strong business case. “Cement plants must walk a tightrope to maximisev gains from renewable energy,” the report cautions, estimating a 6.9 GW opportunity. Aluminum, despite its 4.1 GW potential, remains the toughest nut to crack. With 80% of its emissions tied to captive coal plants (costing ₹3.5/kWh), solar at ₹4.2/kWh struggles to compete—except in states like Uttar Pradesh, where high coal freight costs tip the scales. A case study of HINDALCO’s Renukoot plant in Uttar Pradesh projects ₹5 billion in annual savings (4-6% of revenue) by switching to 1.8 GW of solar.
Is 24/7 renewable possible?
While 20 GW is achievable today, the report explores the leap to 24/7 renewable energy—a goal pledged by corporations like Dalmia Cement and JSW Energy under initiatives like RE100. Sourcing 50% of electricity from variable RE (solar and wind) is already cost-effective, requiring no storage and leveraging grid banking to manage surplus. “Sourcing half of the electricity from variable RE is viable for industries today,” the report states, modeling a 500 MW industrial load met with 571 MW solar and 223 MW wind.
However, scaling to 80% RE incurs a 1.4X cost premium (₹3.5-4/kWh), driven by storage needs, while 24/7 RE jumps to 3.5X (₹9.5/kWh average), necessitating massive solar oversizing (2,443 MW) and battery storage (2,753 MW-4hr). “The final 3% of demand is the hardest to meet, requiring disproportionately high storage investments,” the report warns.
“As industries increasingly rely on variable renewable energy, they will expect high levels of reliability,” said Dan Travers, co-founder of Open Climate Fix. “High-quality forecasting will be essential to optimise storage and keep costs in check.”
Policy and market enablers
India’s Green Energy Open Access Rules 2022 have fueled this shift, enabling industries to procure RE directly, though state-level variations in charges like cross-subsidy surcharges (₹0.5-2/kWh) pose challenges. “Policy and institutional barriers must be dismantled to maximise this transition,” said Labanya Prakash Jena, sustainable finance consultant at IEEFA.
Green tariffs, offered by distribution companies (DISCOMs), could bridge the gap to 24/7 RE. “Green tariffs have the potential to transform DISCOMs’ role,” the report suggests, noting their ability to aggregate RE supply and simplify procurement. Yet, premiums of ₹0.2-1/kWh and uncertainty in pricing remain hurdles.
Global stakes and local gains
Decarbonisation also unlocks global competitiveness. The EU’s Carbon Border Adjustment Mechanism (CBAM), set for 2026, could raise steel export costs by ₹60-80/tonne and aluminum prices by 30% for Europe-bound shipments (3-4 MTPA steel, 0.7 MTPA aluminum). RE adoption aligns with India’s Green Steel Taxonomy (December 2024), enabling steelmakers to hit 3-star (2.0-2.2 t-CO2e/tfs) or higher ratings, enhancing market access. “Reducing carbon intensity can unlock new international markets and partnerships,” the report notes, citing early movers like Kalyani FeRRESTA and Shree Cement. Locally, states like Odisha and Chhattisgarh could attract climate finance, cementing their status as green hubs.
While 24/7 RE remains costly, the report pegs 80% RE as a “realistic near-term target” for committed industries, balancing cost (₹3.5-4/kWh) and decarbonisation. “Renewables are already a cost-effective solution today, and 24/7 clean power is the benchmark for the future,” said Killian Daly, Executive Director of EnergyTag.