Summary:
Indian cement companies plan to increase renewable energy capacity by nearly 50% to 5.8–6 GW by 2028, involving an estimated ₹13,000 crore investment. The green power push could reduce energy costs, improve operating margins and support long-term decarbonisation across the cement sector.
India's major cement companies are set to increase their renewable energy capacity by around 50% in next 2 years to cut costs
The Power sector accounts for major share of costs for any cement producer. With energy prices becoming volatile and wanting to be less dependent on conventional sources of power, companies are eyeing solar, wind, waste heat recovery and other alternate sources of energy. The push for adopting green power and cutting down on carbon footprint is expected to help cement companies reduce costs besides meeting decarbonization goals.
Indian cement companies plan to boost their green energy capacity to 5.8-6 GW by 2028 from 4 GW as of March 2026
Industry players are aiming to increase renewable energy by 50% in next 2 years. According to the draft roadmap released by Confederation of Indian Industry, the additional capacity can generate cost savings of ₹6,200-6,700 crore, providing a payback period of 1.8-2.2 years.
Power and fuel costs account for 40-50% of costs for a cement producer. For every 5% enhancement in the use of green power, power and fuel costs can be lowered by ₹15-16/tonne. At 25% replacement level, savings would be of the order of ₹75-80/tonne, translating into 140-160 bps expansion in operating margin.
Major players such as UltraTech Cement, Shree Cement, ACC, Ambuja Cements, Birla Corporation, Dalmia Bharat and Ramco Cements among others are likely to invest significantly in renewable energy. The aforementioned account for 65% of India's cement capacity as in FY24. Decarbonization push is expected to benefit the sector in long run, as companies are looking to curb carbon emissions for compliance with global ESG norms, besides enhancing competitiveness.
Cement manufacturing is one of the most carbon intensive industries. The clinker production process entails highest share of emissions (57-60%), followed by emissions from fuel combustion (27-30%) and electricity consumption (10-13%). Multiple initiatives are being undertaken by companies to cut down carbon emissions. This includes greater use of renewable energy, development of blended cement, using alternate fuels, enhanced clinker production and carbon capture, utilization and storage.
Thermal substitution rate (TSR) or replacement of conventional fuels with alternative ones is another key avenue being tapped by companies for decarbonization. At present, India's cement sector has a TSR of 6%, as against 10-15% in China. There are expectations that TSR in India would be increased to 10-15% in next few years.
Why are cement companies pushing for green power?
The push for renewable energy by cement companies is a result of both economic and environmental considerations
Cement companies are facing pressure on their margins owing to rising coal, pet coke and electricity prices. Renewable energy offers a more reliable and cost effective source of power, thereby offering scope for cost optimization and margin expansion
Higher adoption of renewable energy can also aid in enhancing competitiveness of cement producers. This is owing to rising demand for cement from infrastructure, housing and government backed projects like PM Ghar Gaon Yatra.
Impact on cement stocks and companies
The proposed push for green power can help in improving investor sentiment for the sector as it provides cost benefits in long run. Companies which have higher share of renewable energy in their energy mix stand to gain on account of cost advantages and greater operating flexibility. However, the extent of benefits would depend on speed of execution and capital allocation. While higher capex could hurt near term margins, the benefits in terms of cost savings and enhanced cost competitiveness would outweigh the costs in long run. The renewable energy push by India's cement companies has the potential to transform the sector, by moving away from being just a carbon footprint reducer to a cost efficient and competitive business model.
