Indian steel and metal companies are rushing to secure renewable energy deals to cut carbon emissions and avoid penalties under the EU’s upcoming Carbon Border Adjustment Mechanism (CBAM). This demand extends beyond large steel and aluminium companies to their suppliers, aiming to reduce emissions across their supply chains.
Renewable energy providers report that demand outstrips current capacity, with new projects already sold out for the next few years. Avaada chairman Vineet Mittal indicated that due to land and infrastructure constraints, new solar and wind projects will not be ready until 2026. He estimates a demand-supply gap of about 10 GW, compared to India’s current 134 GW of operational wind and solar capacity.
Sunsure CEO Shashank Sharma noted that the push for decarbonization, driven by EU carbon taxes, has led to a shortage of renewable energy for commercial and industrial customers, creating a capacity crunch and likely increasing tariffs. Many renewable energy developers can’t commit to power supply before 2025-26.
The demand is particularly high for round-the-clock (RTC) green power, which requires infrastructure like battery or pumped-hydro storage to ensure constant supply. Mittal expects RTC power to be in short supply until 2027 when more storage solutions become available.
The CBAM, effective from October 2023, will tax excess carbon emissions in imports to the EU starting in January 2026, impacting sectors such as steel, aluminium, and cement.
India’s Position
Europe is a key market for Indian steelmakers, with India being the second-largest exporter of steel to the EU in 2023. However, Indian mills have higher emissions, averaging 2.55 tonnes of CO2 per tonne of steel, compared to 1.6 tonnes for South Korean steelmakers.
To address this, Indian companies like JSW and Tata Steel are investing in renewable energy through agreements with JSW Energy and Tata Power. Hindalco plans to operationalize 300 MW of renewable energy by next year, and Vedanta Group has created Serentica to meet its renewable energy needs. Hindustan Zinc has introduced a low-emission zinc line using RTC renewable energy to cater to steelmakers ahead of the CBAM levies.