For all the roadmaps, pledges and targets that big Indian companies have made to achieve net-zero emissions in future, they have fallen short on a relatively low-hanging fruit on the decarbonisation journey – sourcing electricity from renewable sources instead of fossil fuels.
An analysis of electricity consumption by leading companies in the cement, steel, aluminum, textile and fertiliser sectors found that of the 169 billion units of electricity consumed, only 8 billion units, or about 6%, came from renewable sources.
Heavy industry, by its nature, consumes large amounts of energy to generate heat for industrial processes, but the majority of this energy consumption is for electricity use, which could be obtained from renewable sources, the analysis authors said.
The data was compiled by think tank Climate Risk Horizons (CRH) from publicly disclosed information from 30 companies, including Jindal Steel, UltraTech Cement and Hindalco, several of which have announced net-zero targets.
“It’s convenient for companies to say they can’t switch because of technical challenges in their industrial processes, but we’re talking about shares of electricity that can be changed more easily,” said Ashish Fernandes, founder of the think tank Climate Risk Horizons and co-author of the study.
High-emissions, hard-to-abate sectors account for 21% of India’s emissions. While the development of widespread and stable renewable energy sources for industrial processing is still a work in progress, existing guidelines and standards such as the Science Based Targets initiative can help companies benchmark their progress in decarbonizing.
Despite the opportunity for decarbonization from renewable electrification, CRH’s analysis finds that most companies are hesitant to set firm targets.
Alpendra Nath Mullick, vice-chairman of the Business Sustainability Council at the Energy and Resources Institute (TERI), said heavy industry recognises the need to increase the share of renewable energy and the scale of this demand needs to be supported by power distribution companies.
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It’s convenient for companies to say they can’t switch because of technical challenges in their industrial processes, but we’re talking about percentages of electricity that can be changed more easily.
Ashish Fernandes, Founder, Climate Risk Horizons
“State-owned electricity distribution companies need to put in place tools that will help them forecast what the demand for renewable energy from heavy and consumer goods industries will be and procure accordingly. But this is not yet widely available,” he said.
Industry Rankings
Of the five hard-to-reduce industries included in the analysis, companies in the fertilizer sector are performing the worst, sourcing less than 0.5% of the sector’s energy needs from renewable sources. These companies include Coromandel, National Fertilizers, Chambal Fertilizers, Rashtriya Chemicals and Fertilizers and Gujarat State Fertilizers and Chemicals Limited.
The best performing sector, the cement sector, generated only 2.5% of its energy demand from renewable energy.The cement sector analysis included Shree Cement, Ambuja Cement, Dalmia Cement, UltraTech Cement and ACC Cement.
Each company’s energy consumption was assessed based on four broad criteria: reporting and transparency in annual reports, renewable energy sources, demonstration of decarbonization intent through renewable energy targets, and current practice regarding the share of renewable energy in energy and electricity consumption.
Shahi Textiles, one of the largest apparel manufacturing companies in India, performed best among all heavy industrial companies. 70 percent of the company’s total power consumption comes from renewable energy. The company has also set a target of 100 percent renewable energy for its power consumption and has aligned its target with the Science Based Targets Initiative (SBTI).
The report also contrasts the decarbonisation efforts of heavy industry with two less energy-intensive sectors – fast moving consumer goods (FMCG) and information technology (IT) – which it says “contribute significantly to the Indian economy and are therefore relatively easier to transition to renewable energy”.
Companies considered in the former include Britannia, Godrej, ITC Limited, Nestle and Hindustan Unilever Limited. The IT sector includes HCL Tech, Tech Mahindra, Wipro, Infosys and Tata Consultancy Services.
Despite FMCG consuming less electricity, most of its 83% share in renewable energy was reported to come from biofuels/biomass, while the IT sector’s share was around 45%.
“These industries appear to be doing better than heavy industry when it comes to using renewable energy, but this is misleading given the relative ease of switching to 100 percent renewable energy,” the report said, also noting that biofuels and biomass are not renewable resources on an industrial scale.
The CRH analysis found that no other heavy industrial companies are piloting decarbonization programs except for Jindal Steel, which is currently experimenting with green hydrogen, using it instead of ammonia at its steel plants.
Electrification Industry
Some of the challenges that heavy and consumer goods industries face in switching to renewable energy include the high temperatures required and reliance on fossil fuels as feedstock, as well as long asset lifespans and high tariffs that come with electrifying commercially available processes.
However, renewable electrification would reduce emissions by approximately 180 million tonnes (Mt) of CO2 Reduce emissions by 2030 and projected CO2 emissions for 20302 According to Ember Climate, another think tank, emissions from these industries:
“Most of the decarbonisation achievable in Indian industry in the 2020s will come from greening the electricity supply, which will not only deliver potential emissions reductions but also broader benefits to industry and the renewable energy sources (RES) ecosystem,” the Ember report said.
Currently, most of the companies assessed in the CRH report are procuring renewable energy at a rate below their 24.61% renewable purchase obligation (RPO). “State regulatory commissions, in most cases, are either not interested or do not have the capacity to pursue this (RPO) target, which is why this target is not being realized,” Fernandez said.
The CRH report said renewable energy power purchase agreements (PPAs) “should become the primary lever for companies to decarbonise”, as new green energy open access regulations give the industry the option to buy power directly from generators rather than traditional distribution companies.
“Industries have a choice between having captive power plants or taking open access supply from renewable energy projects. Procuring renewable energy from open access sources is preferable as there is a clear picture of the number of renewable energy units being used. We are seeing an increase in this route in states like Gujarat and Karnataka,” Mullick said.
This story was published with permission from Mongabay.com.
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