Steel MSMEs Can Cut Power Bills By Up To 34%, But Can All Factories Get It? Report Says

India’s secondary steel industry could significantly reduce electricity costs by shifting to renewable energy, but the widely cited 34 per cent saving is not a nationwide guarantee. The figure comes from a specific Raipur model, while a comparable Rajkot case estimates savings of about 20 per cent.

A new report, Powering India’s Secondary Steel Transition: The Business Case for Cluster-Based Renewable Electricity Procurement, assessed the renewable-energy potential of 22 secondary-steel clusters. Raipur, Belgaum, Shimoga, Rajkot and Bhavnagar emerged as the top five based on factors including power demand, renewable potential, state policies and land availability.

Detailed modelling was carried out for Raipur and Rajkot. In Raipur, a representative integrated furnace and rolling mill taking a 10-12 MW share in a 50-70 MW group-captive solar project could cut electricity costs by around 34 per cent, with annual savings of nearly Rs 2.4 crore against an equity contribution of about Rs 2.7 crore.

In Rajkot, a representative foundry taking a 5 MW share in a group-captive solar project could save around 20 per cent, requiring about Rs 1.4 crore in equity. The report estimates the investment could be recovered within one to two years.

The gap between the two cases shows why the 34 per cent figure cannot be applied to every steel MSME in India. Actual savings depend on state tariffs, open-access charges, project size, industrial load patterns, renewable costs, banking rules and grid conditions.

Renewable adoption among secondary-steel MSMEs is currently estimated at only 11 per cent. With more than 1,000 units in the sector, this broadly points to around 100-110 units, although there is no official factory-level count.

The low adoption reflects practical hurdles. Steel furnaces require reliable electricity, while rooftop solar alone may not meet their needs. Smaller companies also struggle with large upfront investments. State-level banking rules, transmission and wheeling charges and other open-access costs can further reduce savings.

Grid constraints are another concern, with some steelmakers reporting renewable-generation curtailment when local infrastructure cannot absorb the power.

The report proposes cluster-based group-captive procurement, allowing MSMEs to pool demand and jointly invest in larger renewable projects.

The opportunity is significant because electricity can account for up to 40 per cent of operating costs, while secondary steel contributes around 38-40 per cent of India’s crude steel output.

The evidence points to substantial savings in favourable clusters, not a uniform 34 per cent reduction nationwide. The unanswered question is how much the other 20 clusters could save after local tariffs, regulations and grid costs are factored in.