NEW DELHI: Indian small steel producers, who are responsible for nearly 40 per cent of India’s crude steel production, could cut their electricity bills and also become carbon efficient by moving to renewable energy as a source of power, reported Associated Press.
The move, though expensive, could become profitable if the renewable energy switch is powered by joint ownership of the source, suggested the study called-“Powering India’s Secondary Steel Transition.”
The report has been published jointly by Confederation of Indian Industry (CII), WWF-India, the nonprofit group Climate Catalyst and the think tank JMK Research. It was released on August 12 (Wednesday).
The report found renewable electricity could reduce annual power costs by about 2.2 crore to 2.4 crore rupees ($250,000 to $275,000) per unit — a reduction of up to 34% in annual power costs, AP said.
Electricity accounts for up to 40 per cent of operating costs for many small steel producers, making it one of the industry’s biggest expenses. Profit margins at many of India’s smaller steel companies have already been squeezed by rising fuel costs tied to the Iran war, adding urgency to the push for cheaper power. Cutting down these costs meaningfully could eventually lead to larger profit margins for the secondary unit-based producers.
Shifting to clean power could also help shield Indian steel exporters from the European Union’s carbon taxes that took effect at the start of this year — an added business incentive beyond the domestic cost savings.
With joint ownership, which is also similar to owning the renewable energy, which is ultimately the power source for the steel-maker, with a cluster, fundamentally changes the cost and risk of production.
“A cluster-based approach can fundamentally change how small steelmakers access renewable energy. Aggregating demand through industrial associations makes projects more bankable, enables optimal plant sizing and reduces the investment risk borne by any single unit,” Prabhakar Sharma of JMK research was quoted as saying by AP.
India, the most populous country in the world, is also the third-largest carbon emitter according to the 2025 GHG emissions of all world countries report (JRC/IEA). It emits approximately 8.2 per cent of the entire carbon emission done on planet earth by all countries combined. Of that, steel companies account for 12 per cent of the total carbon emission by India per year.
India also aims to be net zero emitter by the year 2070 as per Prime Minister Narendra Modi’s speech at the COP26 United Nations Climate Change Summit in Glasgow, Scotland in 2021.
Only about 11% of smaller steelmakers use renewable power, compared with roughly 22% of India’s overall electricity mix. Therefore, Vinoth Balakumar of the Confederation of Indian Industry feels that increasing that reach is important for India to reach its carbon emission targets.
“The companies are ready to change and have realized that, to maintain profits, they could try to shift to renewable electricity,” he said.
The report further claimed that owners of small steel companies are willing to shift to clean power because many of their domestic and international customers prefer steel with a lower carbon footprint.
However, hurdles like high costs at an individual level, lower awareness and most importantly government regulations and red-tapism in owning the RE have kept the small steelmakers away from it.
“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 Gujarat, the second-largest generator of renewable energy, the steelmakers have a unique problem of inadequate transmission and grid infrastructure.
“We are being asked to reduce our solar power production by up to 80% at times by state government authorities,” the report quoted Dhirubai Patel, owner of a steel company in Rajkot, home to one of India’s largest steelmaking clusters in Gujarat.
Source: The Financial Express
