Cement companies' green power mix likely to rise to 42% by FY25: Report

Cement companies' green power mix is likely to jump to 40-42 per cent by FY25 from 35 per cent in FY23, which will lead to savings of 140-160 basis points by way of lower energy cost, a report said on Monday.

Major cement players are looking at reducing their emissions by 15-17 per cent over the next 8-10 years by increasing the share of blended cement, which uses less clinker and, consequently, less fuel, Icra Ratings said in the report. This, in turn, will help increase the share of green power intake through a mix of solar, Wind and Waste Heat Recovery System (WHRS) capacities, as per the report.

There is also a move to shift to alternate fuels, the report said.

The rating agency estimates that the share of green power will account for 40-42 per cent of the total power mix for cement companies by March 2025 from around 35 per cent in March 2023.

According to Anupama Reddy, vice-president at the agency, capital outlay towards green power investments by major cement makers for the planned addition of 537 MW green power is expected to be around Rs 5,500 crore in the next two years, considering per MW installation cost of Rs 12-13 crore for WHRS and Rs 4-4.5 crore for solar plants.

Such investments are likely to result in annual savings of Rs 2,000 crore in power cost for these companies once their planned green power capacities become fully operational, Reddy said.

The cement industry is highly energy-intensive and is one of the largest consumers of coal as primary fuel -- only behind iron and steel.

Electricity requirement of the cement industry has traditionally been met from the state grids, along with coal-based captive thermal plants. Additionally, cement plants use significant quantities of coal in clinkerisation-emitting greenhouse gases.

The agency expects the share of blended cement to increase to 80-82 per cent over the medium term from 77-79 per cent in FY23.

The increasing focus on using green power is likely to lower the industry's dependence on high-cost thermal power and grid for energy, thus reducing the operating cost and the carbon footprint.

On the benefits of green power, Reddy further said, assuming a thermal power cost at Rs 6.5/unit, WHRS cost at Rs 0.75/unit and solar power cost at Rs 4.5/unit, a 25 per cent replacement of thermal power with green power can lead to cost savings of 15-18 per cent and an improvement in operating margins by 140-160 bps for cement companies.