BENGALURU, India — A new report suggests that smaller steel companies in India, which contribute to nearly 40% of the nation’s crude steel output, can significantly lower their electricity costs and carbon emissions by switching to renewable energy sources. This shift could save these companies between 22 million to 24 million rupees (approximately $250,000 to $275,000) per unit annually, translating to savings of up to 34%.
The report, titled “Powering India’s Secondary Steel Transition,” was developed by a collaboration of environmental organizations and industry groups, including the Confederation of Indian Industry and WWF-India.
Electricity expenses account for as much as 40% of the operating costs for many smaller steel manufacturers, making energy one of the largest financial burdens they face. Advisors noted that rising fuel prices, partly due to the ongoing war in Iran, have squeezed profit margins for these businesses.
As India stands as one of the top emitters of carbon dioxide and other greenhouse gases, addressing emissions from the steel sector—which is responsible for about 12% of India’s total emissions—is crucial for the country’s commitment to achieve net-zero emissions by 2070.
Switching to clean energy can also protect Indian steel companies from European carbon taxes that have recently come into effect. “The steel industry needs to find low-cost ways to cut emissions as pressure mounts to shrink their carbon footprint,” said Prabhakar, a representative from JMK Research, one of the co-authors of the report. He emphasized that increasing renewable energy production in India presents an easy opportunity to reduce carbon pollution.
Joint Investment in Clean Energy Projects
The report advises that smaller steel companies could benefit the most from collaborating to invest in renewable energy projects, allowing them to access electricity according to their contributions and requirements. This collective approach can reduce initial financial burdens for individual companies and create larger projects that are more commercially viable.
“A collaborative approach can greatly improve how small steelmakers gain access to renewable energy,” Prabhakar stated. “By coming together through industrial associations, these companies can create more bankable projects, which helps to optimize plant sizes and distribute investment risk.”
Despite the tripling of India’s renewable energy capacity over the past decade, only around 11% of smaller steel producers are currently using renewable energy—less than half of the overall electricity mix in India.
Vinoth Balakumar from the Confederation of Indian Industry highlighted the importance of helping these smaller firms transition to clean energy to meet India’s ambitious climate commitments. “Many companies are eager to transition to renewable electricity to stay profitable,” he mentioned.
Challenges to the Transition
While many steel company owners recognize the importance of moving to clean energy due to customer demand for lower-carbon steel, challenges remain. High costs, government regulations, and a lack of awareness about the benefits of renewable energy hinder progress.
Sanjay Tripathi, a steel company owner in Chhattisgarh, explained that high capital costs make it difficult for smaller producers to shift towards renewable energy. In Gujarat, known for its extensive renewable energy generation, steelmakers face difficulties with transmission and grid infrastructure, which limits their ability to utilize their solar investments fully.
Dhirubai Patel, another steel manufacturer in Rajkot, shared that local authorities sometimes require them to reduce their solar energy production, despite having invested in solar facilities.
“We urge the government to improve infrastructure and streamline processes to support our operations,” Patel remarked. “Despite having good policies, we often encounter a lack of cooperation from various government departments. A change in mindset is needed.”
Overall, the report highlights the potential for smaller steel companies in India to embrace renewable energy, emphasizing both financial and environmental benefits.
