RE-powering India’s heavy industries꞉ 20 GW today, 24/7 tomorrow

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Methodology

Cost benefit analysis for renewable energy procurement by industries

The analysis evaluates the current cost structure (BAU) for heavy industries by compiling HT industrial electricity tariffs across states and considering captive coal-based generation and waste heat recovery costs, assumed at ₹1.5/kWh for fixed and variable expenses. In the renewable energy (RE) scenario, a solar tariff of ₹2.5/kWh is used, incorporating state-wise charges such as transmission, wheeling, cross-subsidy, and additional surcharges, while also factoring in applicable waivers under green energy open access rules. The data for state-specific tariffs and open access charges are updated until December 2024.

The RE open access model follows a cost optimisation logic, replacing grid or captive power with the cheapest available option. By comparing variable electricity costs, the analysis estimates cost savings per unit, which is then used to assess the profitability improvement for industries transitioning to renewable power.

Power purchase agreement (PPA) Optimisation Model

The PPA optimisation model determines the least-cost mix of solar, wind, and battery storage to meet industrial demand while ensuring reliability. It considers a 500 MW peak load with an 82% load factor, incorporating the costs of solar, wind, and battery storage. Generation profiles are derived from historical weather data (2017–2023) to account for variability in renewable resource availability.

Using PyPSA, the model optimises the capacity of solar, wind, and battery storage to meet the demand profile while achieving renewable energy consumption targets ranging from 50% to 100%. The optimisation is performed across all weather years to ensure robustness. Finally, the model estimates the cost of meeting different RE targets under a PPA framework.

The model incorporates banking provisions, allowing excess renewable energy generated during high-output periods to be credited and used when generation falls below demand. The banked units are limited to 30% of the electricity purchased from the grid each month and incur a banking charge of 8% on the units banked. Any excess generation beyond this limit is assumed to be sold to the discom at ₹1.8/kWh, which is 75% of the lowest solar tariff (approximately ₹2.5/kWh). This framework ensures a realistic assessment of surplus energy utilisation and valuation under prevailing market conditions.

Acknowledgements

Contributors

Special thanks to Killian Daly and Shailesh Telang (EnergyTag), Labanya Prakash Jena (IEEFA) and Kamesh Korangi (Anthropocene Fixed Income Institute) for their support in reviewing this article and providing guidance. Thanks to Chelsea Bruce-Lockhart and Jivan Zhen Thiru for their contributions to the report’s illustrations. Thanks to Shiyao Zhang, Sachin Sreejith and Ardhi Arsala Rahmani for their communications support. Thanks to Aditya Lolla for conducting the internal review and providing valuable suggestions.