BENGALURU – India’s smaller steelmakers, which together produce nearly 40% of the country’s crude steel, could cut power bills by roughly one-third and significantly lower carbon emissions by moving to renewable electricity, a report released Wednesday said.
The report, titled “Powering India’s Secondary Steel Transition,” estimated that switching to renewable power could save each unit about 22 million to 24 million rupees ($250,000 to $275,000) annually, reducing electricity costs by as much as 34%.
It was prepared jointly by a consortium of environmental organizations and industry groups, including the Confederation of Indian Industry, WWF-India, nonprofit Climate Catalyst and research firm JMK Research.
For many small steel producers, electricity makes up as much as 40% of operating costs, placing it among their biggest expenses. Margins across parts of India’s smaller steel industry have also come under pressure from higher fuel costs linked to the Iran war.
India, the world’s most populous country, is also one of the largest emitters of carbon dioxide and other greenhouse gases that drive global warming.
Steel is a major part of that challenge, accounting for up to 12% of India’s yearly emissions. Cutting pollution from the sector is seen as critical to the country’s pledge to reach net-zero emissions by 2070.
Using cleaner power could also give Indian steel exporters a buffer against European carbon taxes that began taking effect at the start of this year.
“With rising pressure on all industries to reduce their carbon emissions, a high-emitting sector like steel has to look at ways to reduce emissions at the least cost possible,” said Prabhakar of JMK Research, one of the report’s authors, who uses only one name. “With the huge growth in renewables in India, shifting to renewable electricity is low-hanging fruit for reducing carbon pollution.”
Steel firms can save with joint clean power investments
The report found the most practical option for small steel producers is to jointly invest in and own a renewable energy project from which they can draw electricity based on their investment and electricity needs.
This approach lowers the upfront financial burden for individual companies and creates projects large enough to be commercially viable, the report said.
“A cluster-based approach can fundamentally change how small steelmakers access renewable energy,” Prabhakar said. “Aggregating demand through industrial associations makes projects more bankable, enables optimal plant sizing and reduces the investment risk borne by any single unit.”
Renewable energy adoption remains limited among India’s smaller and medium-sized steel companies despite the country’s clean power capacity tripling over the past decade. The report estimated only about 11% of smaller steelmakers use renewable power, compared with roughly 22% of India’s overall electricity mix.
Helping small and medium steelmakers access clean energy is essential to India’s ambitious climate goals, said Vinoth Balakumar of the Confederation of Indian Industry.
“The companies are ready to change and have realized that, to maintain profits, they could try to shift to renewable electricity,” he said.
Low awareness, red tape and high costs slow clean power shift
Owners of small steel companies said they are willing to shift to clean power because many of their domestic and international customers prefer steel with a lower carbon footprint. But high costs, government regulations and, in some regions, a lack of awareness about the benefits of renewable electricity are slowing the transition.
“When capital costs are really high, it makes it less viable for smaller companies,” said Sanjay Tripathi, a steel company owner in the central Indian state of Chhattisgarh.
In the western state of Gujarat, the country’s second-largest generator of renewable energy, steelmakers said inadequate transmission and grid infrastructure prevent them from using all the solar power they have invested in.
“We are being asked to reduce our solar power production by up to 80% at times by state government authorities,” said Dhirubai Patel, who owns a steel company in Rajkot, home to one of India’s largest steelmaking clusters in Gujarat.
Patel and several other steel manufacturers in the city invested in a solar power plant that began operating in 2021.
“Our request is for the government to invest in infrastructure and make it easier for us to do business. We have a lot of good policies, but there is a lack of cooperation from officials in many government departments,” Patel said. “They are still living in the old era and need a change in their mindset.”
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