The cement industry is preparing to invest Rs 13,000 crore in green energy capacity over the next two years, according to ratings agency ICRA, taking the clean energy capacity of major producers to about 6 gigawatts by March 2028 from around 4 GW in March 2026. The shift is being presented not only as an emissions-reduction measure but also as a response to fuel-cost volatility and pressure to improve operating margins.
That dual purpose is central to understanding the transition. Cement is among the most emissions-intensive industrial activities, and its decarbonisation cannot depend on a single intervention. ICRA’s assessment points to a portfolio approach involving green power, blended cement, alternative fuels, clinker-efficiency improvements and, over a longer horizon, carbon capture. Green energy is currently the most commercially attractive part of that portfolio because it can reduce emissions while producing relatively rapid operating savings.
The scale of the proposed investment is significant in relation to the industry’s energy profile. ICRA expects the additional clean energy capacity to generate annual savings of Rs 6,200 crore to Rs 6,700 crore. On those estimates, the investment could have a payback period of 1.8 to 2.2 years. The figures indicate why renewable power and other forms of green energy are moving from the margins of corporate sustainability programmes towards the centre of cement companies’ cost strategies.
The emissions challenge, however, begins before electricity consumption. According to ICRA, the calcination process accounts for 57-60 per cent of total emissions from cement production. Fuel combustion contributes another 27-30 per cent, while electricity consumption accounts for 10-13 per cent. This distribution limits what can be achieved through renewable power alone. Clean electricity can address the power-related share and, depending on the energy system, help reduce exposure to fuel and operating costs, but the largest source of emissions is embedded in the chemical process that converts limestone into clinker.
That is why the industry’s transition is being structured around multiple levers. ICRA said major cement producers have established net-zero emission roadmaps over the next 15-20 years. The agency described the sector as accelerating the adoption of green power, blended cement, alternative fuels and clinker-efficiency improvements. The combination reflects the different sources of emissions and the varying maturity, cost and application constraints associated with each intervention.
Green power has the clearest near-term commercial case in the assessment. Anupama Reddy, vice-president and group head for corporate ratings at ICRA, said every 5 per cent increase in green power replacement could lower power and fuel costs by Rs 15-16 per tonne. At a 25 per cent replacement level, the resulting savings could reach Rs 75-80 per tonne and support an operating-margin expansion of 140-160 basis points.
These estimates help explain the proposed investment more clearly than a capacity figure alone. The shift to clean energy is not being driven only by regulatory or environmental expectations. It also offers cement producers a way to reduce their exposure to volatile energy prices, which form a material part of the industry’s operating economics. In this sense, decarbonisation is becoming linked to competitiveness: companies that can replace a larger share of conventional energy may also improve cost predictability and margins.
The expected increase from 4 GW of clean energy capacity in March 2026 to 6 GW by March 2028 nevertheless represents only one part of the sector’s pathway. The report does not establish how the additional capacity will be distributed among companies, which technologies will provide it, or whether the capacity will be located at individual plants or connected through broader power arrangements. Those details will determine how effectively the announced investment translates into emissions reductions and operating savings.
Cement producers are also examining carbon capture, utilisation and storage, or CCUS. The government has proposed an outlay of Rs 20,000 crore over five years to support CCUS deployment across key sectors, including cement. The technology is relevant to the industry because it could address process emissions that cannot be eliminated simply by replacing conventional electricity or fuels.
ICRA’s assessment is cautious about the pace of CCUS adoption. Large-scale commercial deployment is expected to remain gradual because of high implementation costs, significant energy requirements for capturing and processing carbon dioxide, and limited transportation and storage infrastructure. These constraints make CCUS a longer-term option rather than a substitute for measures that can be deployed more quickly.
The distinction matters for industrial planning. A carbon-capture system does not operate in isolation from the rest of the urban and infrastructure economy. It requires energy, equipment, transport arrangements and suitable storage or utilisation facilities. Without those supporting systems, a plant may be able to capture carbon but lack an economical way to move or store it. The limitation identified by ICRA is therefore not only technological; it is also an infrastructure and coordination problem.
Blended cement represents another route for reducing emissions, although its expansion is expected to be gradual. ICRA said adoption depends on application-specific requirements and customer preferences. Blended cement can reduce the quantity of clinker required in a product, but its use is shaped by performance expectations, construction applications and market acceptance. This means that the pace of change will depend not only on producers but also on how buyers, engineers, contractors and project specifications treat different cement compositions.
Alternative fuels present a similar implementation question. India’s thermal substitution rate, or TSR, is around 6 per cent, which ICRA said remains significantly below global benchmarks. TSR measures the replacement of conventional fuels with alternatives such as biomass, municipal waste and industrial waste. Major cement companies are targeting TSR levels of 10-15 per cent over the next three to five years.
The gap between the current rate and the stated target shows that the industry has room to reduce its dependence on conventional fuels, but it also points to the systems needed beyond the factory gate. Biomass, municipal waste and industrial waste must be collected, processed and supplied at a consistent quality and volume. The supplied assessment does not quantify the infrastructure available for that purpose, but the low current TSR indicates that fuel substitution remains an area of unrealised potential.
For cities, this issue extends beyond the emissions profile of individual cement plants. Cement is a basic material for housing, roads, railways, water systems and other forms of urban construction. Changes in the way it is produced can therefore affect the environmental footprint of infrastructure delivered across the country. At the same time, the industry’s demand for alternative fuels and waste-derived materials connects cement production with municipal waste management and industrial resource recovery.
The investment cycle also illustrates the limits of treating industrial decarbonisation as a single policy announcement. Green energy can produce rapid savings, but it cannot by itself eliminate process emissions from calcination. Blended cement can reduce clinker demand, but its adoption is influenced by construction requirements and customer preferences. Alternative fuels can reduce combustion emissions, but their expansion depends on reliable waste and biomass supply chains. CCUS could address harder-to-abate emissions, but its commercial deployment requires substantial energy and transport and storage infrastructure.
Taken together, the evidence supports a sequenced transition. Green power is moving first because the financial payback identified by ICRA is relatively short. Alternative fuels and blended cement offer additional reductions, but their expansion is more dependent on supply systems and application conditions. CCUS remains an important potential option for process emissions, although high costs and infrastructure constraints make it a slower pathway.
What is established is that major cement producers plan to raise clean energy capacity to 6 GW by March 2028 and invest Rs 13,000 crore in doing so. ICRA also estimates annual savings of Rs 6,200-6,700 crore and identifies targets for green power replacement and thermal substitution. What remains less clear from the available material is how quickly those targets will be achieved plant by plant, how the proposed government CCUS support will be implemented, and how construction markets will respond to wider use of blended cement. Those indicators will determine whether the sector’s decarbonisation effort becomes a broad transformation of cement production or remains concentrated in the most financially attractive interventions.
