Indian Economy News

According to a report by ICRA Ratings, cement companies’ green power mix is likely to jump to 42% by FY25

  • IBEF
  • September 19, 2023

The share of green power used by cement businesses is expected to increase from 35-40% by FY25, saving cement companies 140-160 basis points through lower energy costs. According to the ICRA Ratings research report, major cement producers are aiming to cut their emissions by 15-17% over the following 8-10 years by using more blended cement, which consumes less clinker and, consequently, less fuel.

It further stated that this will boost the amount of green power consumed through a combination of solar, wind, and Waste Heat Recovery System (WHRS) capacities. It estimates that the share of green power will account for 40-42% of the total power mix for cement companies by March 2025, up from around 35% in March 2023.

According to Mrs. Anupama Reddy, Vice President, ICRA, capital outlay towards green power investments by major cement makers for the planned addition of 537 MW of green power is expected to be around Rs. 5,500 crore (US$ 660.1 million) in the next two years, considering a per-MW installation cost of Rs. 12-13 crore (US$ 1.44-1.56 million) for WHRS and Rs. 4-4.5 crore (US$ 480-540 thousand) for solar plants.

She also mentioned that once the anticipated green power capacity for these industries is completely operational, such investments are likely to result in yearly savings of Rs. 2,000 crore (US$ 240 million) in electricity costs.

The cement industry uses a lot of energy and is second only to the iron and steel industries in terms of primary fuel use of coal. The state grids and coal-based captive thermal facilities have typically supplied the cement industry's electricity needs. Additionally, cement plants use significant quantities of coal in clinkerisation-emitting greenhouse gases.

The report also expects the share of blended cement to increase to 80-82% over the medium term from 77-79% in FY23.

The industry's reliance on expensive thermal power and the grid for energy is projected to decrease as more emphasis is placed on using green electricity, which will lower operating costs and reduce carbon emissions.

According to Mrs. Anupama Reddy, who spoke further about the advantages of green power, assuming that the cost of thermal power is Rs. 6.5/unit, the cost of WHRS is Rs. 0.75/unit, and the cost of solar power is Rs. 4.5/unit, a 25% replacement of thermal power with green power can result in cost savings of 15-18% and an improvement in operating margins by 140-160 basis points (bps) for cement companies.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.