- Renewable electricity can reduce Scope 2 emissions for electricity-intensive melting, rolling ops
- Group captive renewable projects balance affordability, financial returns, operational practicality
India’s steel decarbonisation debate has largely centred on emerging technologies such as green hydrogen, carbon capture, and low-carbon ironmaking. However, a newly released report by JMK Research and Analytics, prepared in collaboration with WWF-India, Climate Catalyst, and CII-Green Business Centre, argues that one of the industry’s largest near-term decarbonisation opportunities may be considerably simpler and cheaper: renewable electricity.
Rather than positioning renewable electricity purely as an environmental initiative, the report makes a commercial case for secondary steel producers — particularly electricity-intensive MSMEs — to adopt renewable power because it lowers operating costs while simultaneously reducing emissions. The study suggests that economics, rather than climate commitments alone, could become the primary driver of renewable electricity adoption across India’s fragmented secondary steel industry.
The findings are significant because India’s secondary steel sector accounts for roughly 40% of national crude steel production and comprises more than 1,000 electric induction furnaces (EIFs) and around 40 electric arc furnaces (EAFs). These units remain highly exposed to electricity costs, making power procurement an increasingly important competitive differentiator.
Electricity costs are becoming a competitive issue
Unlike integrated blast furnace steelmakers, secondary steel producers rely heavily on electricity to melt scrap, sponge iron, and pig iron. Electricity can account for up to 40% of operating costs for many MSMEs, making power one of the largest variable cost components in steelmaking. The report estimates that renewable electricity is available at around INR 4.5-6/kWh in several states, compared with conventional industrial grid tariffs of approximately INR 7-8/kWh.
This changes the conversation around decarbonisation.
Historically, lower-carbon steel production has often implied higher production costs and dependence on green premiums. In contrast, renewable electricity offers a pathway that can simultaneously improve operating economics and reduce Scope 2 emissions, particularly for electricity-intensive melting and rolling operations.
For many producers, renewable electricity therefore becomes less an ESG initiative and more a procurement strategy.
India’s secondary steel industry presents a large opportunity
The report highlights the scale of India’s secondary steel ecosystem.
The sector currently produces around 61 mnt of steel annually, representing approximately 38-40% of India’s crude steel output. Around 1,072 electric furnaces operate across numerous industrial clusters, consuming an estimated 134-152 TWh of electricity while generating approximately 50-60 mtCO2 of annual Scope 1 and Scope 2 emissions.
Unlike integrated steel plants that make long-term investment decisions individually, India’s secondary steel industry consists predominantly of fragmented MSMEs with relatively limited financial capacity. This fragmentation has historically slowed adoption of renewable power despite favourable economics.
The report argues that aggregation rather than technology may therefore become the key to accelerating renewable electricity adoption.
Group captive model emerges as preferred pathway
One of the report’s more important conclusions is that group captive renewable projects offer the strongest balance between affordability, financial returns, and operational practicality for MSMEs.
Under this model, several neighbouring steel producers jointly invest in a renewable energy project, enabling lower capital commitments while benefiting from exemptions available under India’s electricity regulations.
By contrast, fully captive renewable projects require significantly larger upfront investment and land availability, while third-party open access arrangements often lose competitiveness because of cross-subsidy surcharges, additional surcharges and state-level implementation challenges.
The report also concludes that renewable projects become increasingly viable where multiple steel units are located within the same industrial cluster, allowing electricity demand to be aggregated into bankable projects.
Policy implementation remains biggest constraint
Perhaps the report’s most noteworthy conclusion is that technology is no longer the principal obstacle.
Instead, the largest barriers arise from inconsistent implementation of open-access regulations, varying state electricity policies, banking provisions, transmission approvals, and DISCOM practices.
The study cites examples where commercially attractive renewable projects have been delayed or become less competitive because of state-level regulatory uncertainty rather than project economics. It therefore recommends greater standardisation of group captive implementation, streamlined approvals, and targeted policy support for industrial clusters.
In effect, India’s renewable electricity market may already be sufficiently mature to support widespread industrial adoption; the challenge increasingly lies in regulatory execution.
Implications extend beyond renewable energy
The report also has broader implications for India’s steel and energy markets.
Greater renewable electricity procurement by secondary steel producers could gradually reduce industrial demand for grid electricity during daylight hours while increasing demand for open-access renewable power and storage-backed supply. However, it is important to distinguish between electricity-intensive secondary steel operations and upstream ironmaking.
Coal-based sponge iron production remains responsible for the largest share of emissions within the secondary steel value chain, accounting for roughly 60% of total emissions. Renewable electricity can substantially reduce emissions associated with melting and rolling operations but does not eliminate the coal required for DRI production itself.
Consequently, renewable electricity should be viewed as an important first step in steel decarbonisation rather than a complete solution.
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