How are cement companies tapping into green energy to lower operational costs?
Green power capacity is likely to rise by nearly 50% to 5.8-6 GW by FY2028, likely to generate annual savings of Rs 6,200-6,700 crore, says ICRA
- Sep 9, 2026,
- Updated Sep 9, 2026 11:44 AM IST
India’s major cement companies are set to increase their green power capacity to 5.8-6 GW by March 2028 from around 4 GW as of March 2026, supported by planned investments of Rs 12,000-13,000 crore over the next two years, says rating agency ICRA.
The additional capacity is likely to generate annual savings of Rs 6,200-6,700 crore, implying an attractive payback period of 1.8-2.2 years. While cement remains one of the most emission-intensive industries, the major cement producers have laid out net-zero emission road maps over the next 15-20 years.
The calcination process accounts for 57-60% of total emissions, while fuel combustion and electricity consumption account for 27-30% and 10-13%, respectively. This underscores the need for a multi-pronged decarbonisation strategy.
The Indian cement industry is accelerating its decarbonisation efforts through increased adoption of green power, blended cement, alternative fuels and clinker efficiency improvements.
Apart from sustainability commitments, this transition is also being driven by the need to mitigate fuel cost volatility and enhance cost competitiveness.
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“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,” says Anupama Reddy, Vice President and Group Head, Corporate Ratings, ICRA.
Technology interventions
The industry is also evaluating advanced technologies such as carbon capture, utilisation and storage (CCUS). The Government of India has proposed an outlay of Rs 20,000 crore over five years to support CCUS deployment across key sectors, including cement.
However, large-scale commercial adoption is likely to remain gradual due to high implementation costs, significant energy requirements for carbon capture and processing, and limited CO₂ transportation and storage infrastructure.
“Blended cement remains an important lever for reducing emissions, although its adoption is expected to increase gradually due to application-specific requirements and customer preferences. At the same time, India's thermal substitution rate (TSR) of around 6% remains significantly below global benchmarks, indicating substantial headroom for greater use of alternative fuels such as biomass, municipal waste and industrial waste,” Reddy added.
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Major cement companies are targeting TSR levels of 10-15% over the next three to five years, which should support both a reduction in emissions and an improvement in profitability
Green financing is also emerging as an important enabler for the industry's decarbonisation journey. While adoption remains at a nascent stage in India, some of the leading cement manufacturers have tapped sustainability-linked bonds and loans to finance renewable power projects, waste heat recovery systems and other sustainability-focused projects.
India’s major cement companies are set to increase their green power capacity to 5.8-6 GW by March 2028 from around 4 GW as of March 2026, supported by planned investments of Rs 12,000-13,000 crore over the next two years, says rating agency ICRA.
The additional capacity is likely to generate annual savings of Rs 6,200-6,700 crore, implying an attractive payback period of 1.8-2.2 years. While cement remains one of the most emission-intensive industries, the major cement producers have laid out net-zero emission road maps over the next 15-20 years.
The calcination process accounts for 57-60% of total emissions, while fuel combustion and electricity consumption account for 27-30% and 10-13%, respectively. This underscores the need for a multi-pronged decarbonisation strategy.
The Indian cement industry is accelerating its decarbonisation efforts through increased adoption of green power, blended cement, alternative fuels and clinker efficiency improvements.
Apart from sustainability commitments, this transition is also being driven by the need to mitigate fuel cost volatility and enhance cost competitiveness.
Don't Miss: Setback for Indian professionals? US suspends Cognizant green card filings in H-1B visa fraud probe
“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,” says Anupama Reddy, Vice President and Group Head, Corporate Ratings, ICRA.
Technology interventions
The industry is also evaluating advanced technologies such as carbon capture, utilisation and storage (CCUS). The Government of India has proposed an outlay of Rs 20,000 crore over five years to support CCUS deployment across key sectors, including cement.
However, large-scale commercial adoption is likely to remain gradual due to high implementation costs, significant energy requirements for carbon capture and processing, and limited CO₂ transportation and storage infrastructure.
“Blended cement remains an important lever for reducing emissions, although its adoption is expected to increase gradually due to application-specific requirements and customer preferences. At the same time, India's thermal substitution rate (TSR) of around 6% remains significantly below global benchmarks, indicating substantial headroom for greater use of alternative fuels such as biomass, municipal waste and industrial waste,” Reddy added.
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Major cement companies are targeting TSR levels of 10-15% over the next three to five years, which should support both a reduction in emissions and an improvement in profitability
Green financing is also emerging as an important enabler for the industry's decarbonisation journey. While adoption remains at a nascent stage in India, some of the leading cement manufacturers have tapped sustainability-linked bonds and loans to finance renewable power projects, waste heat recovery systems and other sustainability-focused projects.