For all the roadmaps, pledges, and targets they have drawn up to achieve net-zero emissions in the future, India’s leading corporations perform poorly when it comes to a relatively low hanging fruit in the decarbonisation journey: sourcing their electricity from renewable, and not fossil, sources.
An analysis of the electricity consumption from leading corporations in the cement, steel, aluminium, textiles and fertilisers sectors found that out of 169 billion units of electricity consumed, only eight billion units – around 6 per cent – came from renewable sources.
The nature of heavy industry makes it a high consumer of energy, which is used to generate heat for industrial processes. But a large share of this energy consumption is for electricity use, which can come from renewable sources instead, the authors of the analysis said.
The data was put together by think tank Climate Risk Horizons (CRH) from public disclosures made by companies including Jindal Steel, Ultratech Cement, HINDALCO and 30 others, several of whom have announced net-zero targets.
“It’s convenient for companies to say they’re not able to make the switch because of technological challenges in industrial processes, but we’re talking about the share of electricity that can more easily be changed,” said Ashish Fernandes, founder of think tank Climate Risk Horizons and co-author of the study.
India’s high-emitting, hard-to-abate sectors are responsible for 21 per cent of India’s emissions. The development of vast and stable renewable energy sources for industrial processing is still underway, but existing guidelines and standards, such as the Science Based Targets Initiative, can help corporations benchmark their progress as they decarbonise.
Even though electrification from renewable sources presents an opportunity to decarbonise, most companies are faltering when it comes to setting robust targets, the CRH analysis shows.
Arupendra Nath Mullick, vice president of the Council for Business Sustainability at The Energy and Resources Institute (TERI), says heavy industries are cognisant of the need to increase their share of renewable energy, and that the scale of this demand needs to be supported by electricity distribution companies.
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It’s convenient for companies to say they’re not able to make the switch because of technological challenges in industrial processes, but we’re talking about the share of electricity that can more easily be changed.
Ashish Fernandes, founder, Climate Risk Horizons
“State-owned discoms (distribution companies) need to employ tools that can help them predict what the demand for renewable energy from heavy and consumer industries will be, and procure it accordingly. But this is not being widely used yet,” he said.
Ranking industries
Of the five hard-to-abate industries included in the analysis, companies in the fertiliser sector performed the worst, sourcing less than 0.5 per cent of the sector’s energy needs from renewable sources. The companies included Coromandel, National Fertilisers, Chambal Fertilisers, Rashtriya Chemicals and Fertilisers, and Gujarat State Fertilisers & Chemicals Limited.
The best performing industry – cement – sourced just 2.5 per cent of its energy needs from renewable energy. The cement industry analysis included Shree Cement, Ambuja Cement, Dalmia Cement, Ultratech Cement, and ACC Cement.
Each company’s energy consumption was rated across four broad criteria: reporting and transparency in its annual report, sources of renewable energy, demonstrating intent to decarbonise with renewable energy targets, and current practices vis-a-vis share of renewables in energy and electricity consumption.
Shahi Textiles, one of India’s largest apparel manufacturing companies, performed best among all the heavy industry companies, because 70 per cent of its overall electricity consumption is from renewable energy. It also set a target for 100 per cent renewable energy for its electricity consumption and had their targets aligned with the Science Based Targets Initiative (SBTI).
The report also contrasts the decarbonisation efforts of heavy industries with two less energy intensive sectors – Fast Moving Consumer Goods (FMCG) and Information Technology (IT) – “because they contribute significantly to the Indian economy and are relatively easier to transition to renewable energy,” it says.
The companies considered in the former include Britannia, Godrej, ITC Limited, Nestle, and Hindustan Unilever Limited. The IT sector included HCL Tech, Tech Mahindra, WIPRO, Infosys, and Tata Consultancy Services.
Despite being lower consumers of electricity, much of FMCG’s 83 per cent share in renewable energy reportedly came from biofuels/biomass, while the IT sector’s share was around 45 per cent.
“These industries appear to outperform heavy industry when it comes to utilisation of renewable energy. However, this is misleading given the relative ease by which they can switch to 100 per cent RE,” the report says. It also notes that biofuels and biomass are not renewable sources at an industrial scale.
Except for Jindal Steel, no other heavy industry company was piloting a decarbonisation programme, the CRH analysis noted. Jindal Steel is currently experimenting with green hydrogen, using it to replace ammonia in its steel-making plant.
Electrifying industries
Among the challenges heavy and consumer industries face in switching to renewable sources is the requirement of high temperatures, and reliance on fossil sources as feedstock. They are also challenged by the long lifetimes of their assets, and the high tariffs that can come with electrifying commercially available processes.
However, renewable-based electrification has the potential to avoid approximately 180 million tonnes (Mt) of CO2 emissions by 2030, resulting in a 17 per cent reduction in the projected 2030 CO2 emissions from these industries, according to Ember Climate, another think tank.
“Most of the achievable decarbonisation in Indian industries during the 2020s will come from greening their electricity supply. This will not only bring the potential emission reductions but also provide broader benefits to the industries and the renewable energy sources (RES) ecosystem,” Ember’s report says.
At the moment, most companies assessed in the CRH report are procuring renewable energy at shares that are lower than the Renewable Purchase Obligation (RPO) of 24.61 per cent. “The state regulatory commissions, in most cases, are not either interested in pursuing this (RPO) target or do not have the ability to actually pursue it. That’s why it’s falling by the wayside,” said Fernandes.
Renewable energy power purchase agreements (PPA) “should be the primary source of corporate decarbonisation,” the CRH report says, since the new Green Energy Open Access Regulations give industries the option to purchase power directly from generators, instead of traditional distribution companies.
“Industries have the option to have captive RE plants or to go with open access supply from the RE projects. Sourcing renewable energy from open-access sources is preferable because there’s a clear account of the number of renewable units used. We’re seeing that in states like Gujarat and Karnataka, this route is growing,” said Mullick.
This story was published with permission from Mongabay.com.
