In the Marathwada region of Maharashtra sits Jalna, a secondary steel hub. This hub has grown steadily since the 1960s, when the first steel unit began by recycling old railway compartments. Today, it is home to over 20 rolling mills and induction furnace units, best known for producing recycled TMT bars for the construction sector.
Most of these units run on electric induction furnaces. Electricity is not just another input. It is often the single largest operating cost. During a recent visit, I was struck by how instinctive the energy math felt to many rolling mill owners. Tariffs, contract demand, night-time versus day-time pricing, loan costs, and choices between third-party or group-captive supply are discussed not theoretically, but through the lens of what keeps the business viable.
On paper, RE looks cheaper. But decisions about shifting to it are rarely straightforward. Moving to renewables can change tariff structures, affect existing subsidies, increase the need for storage, or introduce uncertainty if policies evolve mid-way. In Jalna, the hesitation is not about renewables themselves. It is about whether the broader ecosystem makes the transition workable.
Why RE is a critical decarbonisation lever for secondary steel
India’s steel industry is broadly divided into primary and secondary producers. Primary producers run large, integrated plants that convert iron ore into steel. Secondary steel producers operate across the Direct Reduced Iron (DRI), melting and re-rolling value chain, producing sponge iron, crude steel and finished products largely through coal-based DRI plants and electric furnaces that melt steel scrap. Secondary steel clusters like Jalna matter because together they account for 44 per cent of total steel production capacity and are responsible for around 50 million tonnes (MT) of GHG emissions annually, making them central to any decarbonisation effort.
Electricity use in the steel sector is projected to rise sharply, from about 94 TWh in 2021-22 to nearly 184 TWh by 2030-31. Almost half of this demand is expected to come from secondary steel units. This rising demand can increasingly be met through cleaner, renewable sources. India’s Greening Steel Roadmap reflects this direction, signalling an ambition to move toward roughly 43 per cent RE penetration by 2030-31, potentially cutting emissions intensity by around 8 per cent per tonne of crude steel.
Why integrating renewables makes sense but uptake is still slow
Integrating renewable electricity into secondary steelmaking is often described as a low-hanging, yet highly effective, lever for decarbonisation. It reduces scope 2 emissions without changes to the furnace or production route itself. Today, steel units can shift from coal-heavy grid electricity to access renewable electricity through different procurement models. First, a captive full capex model which involves owning 100% of the RE plant, requiring full upfront capital but waiving cross-subsidy and additional surcharges. Second, group captive models allow multiple units to co-own a plant (owning ≥26% equity, consuming ≥51% of electricity), sharing investment costs while also benefiting from waived surcharges. And finally, third-party or open access models let units purchase RE from developers without ownership, eliminating upfront costs but incurring open access charges including cross-subsidy and additional surcharges. Each model offers different trade-offs between capital investment, cost savings, and operational control.
Apart from the emissions reduction, commercial logic increasingly supports this shift as well. As per JMK Research analysis, in secondary steel operation, including those in Jalna, electricity accounts for 40 per cent of operating costs. As renewable electricity prices continue to fall, its supply is becoming cheaper than conventional electricity. Industry estimates suggest that for MSMEs, electricity procurement via DISCOMs costs between ₹7-8/kWh, while the electricity sourced through captive renewable arrangements is significantly cheaper at ₹4-5/kWh for solar and approximately ₹4.5-5.5/kWh for wind (these figures are indicative and vary across states given pricing is shaped by state-level policies).
Yet uptake remains uneven. As of 2022, renewables supplied only around seven per cent of total electricity used by the steel sector. Within this, penetration among secondary units is estimated at roughly 11 per cent, higher than in integrated plants. This number, however, is still modest given the share of renewable electricity in India’s overall electricity generation which stands at roughly 22 per cent. This suggests that abundant renewable capacity on the grid does not automatically translate into reliable, affordable access for micro, small and medium enterprise (MSME)-dominated steel clusters.
Renewable energy demand aggregation is promising but feasibility concerns remain
The issue is not can renewables scale in secondary steel clusters, it is how fast, easy and affordable scaling up will be. This is where pooling renewable energy demand becomes relevant. In theory, when small units aggregate demand, it can lower costs, improve bargaining power with renewable developers, reduce individual financial risk and unlock scale benefits that MSMEs cannot access alone.
This concept of aggregation has already been recognised in the government’s green steel roadmap. But the visit to Jalna was a reminder that aggregation alone is not a silver bullet. We saw genuine readiness from owners to aggregate renewable energy demand and the willingness to put their money where their mouth is. But at the same time, regulatory concerns create understandable hesitation.
One such concern raised by unit owners is around how solar banking rules in the state have shifted. A recent tariff revision tried to confine the use of banked solar electricity to “solar hours”, roughly 9am to 5pm, instead of allowing it to be drawn when plants actually need it, including evenings and nights. This rule was challenged in the Bombay High Court, which stayed the revision.
Another regulatory concern is the loss of existing grid incentives. Steel units in Jalna earn rebates of up to 15 per cent on their electricity bills by maintaining high load factors on the grid. When they switch to renewable electricity through open access or captive generation, their grid consumption falls and so does the rebate.
A third barrier raised relates to how renewable projects are designed. Clusters like Jalna operate around the clock, which means that any meaningful shift to renewables has to work on a 24×7 basis. Wind-solar hybrids can help smooth supply and provide more reliable electricity, since the two resources peak at different times of the day. But current rules in Maharashtra still make it difficult to combine wind and solar across different locations. However, the new state policy looks to promote co-location for hybrid RE projects.
What emerges is a mismatch between the readiness to adopt renewables and the regulatory and economic structures that enable it.
Closing the gap between intent and feasibility
Our upcoming study, with partners JMK Research and Analytics and India Green Steel Coalition (IGSC) co-led by WWF-India and Confederation of India Industry (CII), seeks to examine this gap closely. The study will look at why renewable adoption has not scaled in secondary clusters, compare the feasibility of different procurement models for MSME steel units, and identify the policy and market enablers needed to accelerate uptake. To answer these questions, the study builds a comparative framework that evaluates clusters on both quantitative indicators (like electricity use, land availability and costs) and qualitative factors (like open access implementation and regulatory predictability). The study complements this with field visits and conversations across clusters to understand operational realities and how unit owners perceive renewable energy integration. The findings will be out in May.
Jalna, and clusters like it, are not short on entrepreneurial appetite or willingness to experiment. The real task is designing clear, predictable frameworks that make adoption feasible. If policy, markets and evidence move together, secondary steel clusters can demonstrate how India’s steel decarbonisation story can grow from the ground up.
About the Author
Kinshu
Kinshu is passionate about making complex policy research actionable. She has worked with two senior members of the Indian parliament, helping them draft key amendments, bills and speeches. Most recently, Kinshu worked at the CEO’s office at the Council on Energy, Environment and Water (CEEW) where she was handling central government relations and built CEEW’s network across Asia and Oceania.
