India's leading cement manufacturers are significantly ramping up their investment in green energy to reduce operational costs and accelerate decarbonization efforts. According to rating agency ICRA, the sector is poised to increase its green power capacity by nearly 50% over the next two years.
Major Investments and Projected Savings
By March 2028, major cement companies aim to boost their green power capacity to between 5.8 and 6 GW, a substantial increase from approximately 4 GW recorded in March 2026. This expansion will be supported by planned investments totaling Rs 12,000-13,000 crore over the next two fiscal years.
The shift to green energy is expected to yield considerable financial benefits, with projected annual savings ranging from Rs 6,200-6,700 crore. This attractive return on investment translates into a quick payback period of just 1.8 to 2.2 years for the new capacity.
Anupama Reddy, Vice President and Group Head, Corporate Ratings, ICRA, highlighted the financial incentives: "The highly energy-intensive nature of cement manufacturing, coupled with persistent fuel price volatility and supply-side risks, is driving the sector’s transition towards green power. Every 5% increase in green power replacement can lower power and fuel costs by Rs 15-16 per tonne. Consequently, a 25% replacement level could translate into cost savings of Rs 75-80 per tonne and support an operating margin expansion of 140-160 basis points."
Driving Decarbonization Efforts
Despite cement manufacturing being one of the most emission-intensive industries, major producers are committed to ambitious net-zero emission roadmaps over the next 15-20 years. The decarbonization strategy is multi-pronged, focusing on:
- Increased adoption of green power sources like solar and wind.
- Greater use of blended cement.
- Transition to alternative fuels.
- Improvements in clinker efficiency.
The primary sources of emissions in cement production include calcination (57-60%), fuel combustion (27-30%), and electricity consumption (10-13%). Addressing these areas is crucial for achieving sustainability targets.
Advanced Technologies and Alternative Fuels
The industry is also exploring advanced technologies such as Carbon Capture, Utilisation, and Storage (CCUS). The Indian government has proposed a significant outlay of Rs 20,000 crore over five years to support CCUS deployment across key sectors, including cement. However, challenges like high implementation costs, substantial energy requirements for capture, and limited CO₂ transportation and storage infrastructure mean large-scale commercial adoption is expected to be gradual.
Beyond green power, improving the Thermal Substitution Rate (TSR) is another key lever. India’s current TSR of around 6% is significantly below global benchmarks, indicating substantial potential for greater use of alternative fuels such as biomass, municipal waste, and industrial waste. Major companies are targeting TSR levels of 10-15% over the next three to five years, which will contribute to both emission reduction and improved profitability.
Green financing is also emerging as a vital enabler, with some leading manufacturers already tapping into sustainability-linked bonds and loans to fund renewable power projects, waste heat recovery systems, and other sustainability initiatives.