Cement Companies Eyeing Rs 13,000 Crore Green Power Push to Cut Costs

India's major cement companies are set to increase their renewable energy capacity by around 50 per cent over the next two years, as they look to reduce power costs, improve operating margins and lower dependence on conventional energy sources.

Power and fuel account for a major share of costs for cement producers. With energy prices becoming increasingly volatile, companies are focusing on Solar, wind, waste heat recovery and other alternative sources of energy. The shift towards green power is expected to help cement companies reduce costs while supporting their decarbonisation goals.

Cement companies target 5.8-6 GW green energy capacity

Indian cement companies are planning to increase their green energy capacity to around 5.8-6 GW by 2028, compared with approximately 4 GW as of March 2026. Industry players are targeting a 50 per cent increase in renewable energy capacity over the next two years.

According to the draft roadmap released by the Confederation of Indian Industry (CII), the additional capacity could generate cost savings of around Rs 6,200-6,700 crore, with an estimated payback period of 1.8-2.2 years. The overall green power push is expected to involve investments of around Rs 13,000 crore.

Power and fuel costs account for around 40-50 per cent of the total costs of a cement producer. For every 5 per cent increase in the use of green power, power and fuel costs can decline by around Rs 15-16 per tonne. At a 25 per cent replacement level, the savings could rise to around Rs 75-80 per tonne, potentially translating into a 140-160 basis points expansion in operating margins.

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. These companies accounted for around 65 per cent of India's cement capacity as of FY24.

Decarbonisation remains a key priority

The push towards renewable energy is also being driven by the cement industry's need to reduce its carbon footprint and comply with evolving global ESG requirements. Cement manufacturing is among the most carbon-intensive industrial activities, making decarbonisation increasingly important for companies seeking to remain competitive.

Clinker production accounts for the largest share of emissions, contributing around 57-60 per cent of total emissions. This is followed by fuel combustion at 27-30 per cent and electricity consumption at 10-13 per cent.

Cement companies are therefore adopting multiple measures to reduce carbon emissions. These include greater use of renewable energy, development of blended cement, increased use of alternative fuels, improvements in clinker production efficiency and the development of carbon capture, utilisation and storage technologies.

Thermal substitution offers another avenue

Thermal substitution rate (TSR), which measures the replacement of conventional fuels with alternative fuels, is another key area being targeted by the cement industry.

India's cement sector currently has a TSR of around 6 per cent, compared with 10-15 per cent in China. There are expectations that India's TSR could increase to around 10-15 per cent over the next few years as cement producers accelerate the adoption of alternative fuels.

Why are cement companies pushing for green power?

The push for renewable energy is being driven by both economic and environmental considerations. Cement companies are facing margin pressure from rising coal, pet coke and electricity prices. Renewable energy can provide a more reliable and cost-effective source of power, creating opportunities for cost optimisation and margin expansion.

Higher renewable energy adoption can also improve the competitiveness of cement producers. This becomes particularly important amid rising cement demand from infrastructure, housing and government-backed projects such as PM Ghar Gaon Yatra.

By reducing their exposure to volatile conventional energy prices, cement companies can improve cost visibility while simultaneously lowering their carbon intensity.

Impact on cement stocks and companies

The proposed green power push could support investor sentiment towards the cement sector by creating long-term cost benefits. Companies with a higher share of renewable energy in their energy mix are better positioned to benefit from lower energy costs and greater operating flexibility.

However, the actual benefits will depend on the speed of execution, capital allocation and the ability of individual companies to commission renewable energy projects efficiently. Higher capital expenditure could weigh on near-term margins, but the resulting cost savings and improved competitiveness could outweigh these initial costs over the longer term.

The renewable energy push has the potential to transform India's cement sector by shifting the focus from simply reducing carbon emissions to building a more cost-efficient and competitive business model.

Disclaimer: The article is for informational purposes only and not investment advice.