Aluminium Open Access Renewable India: State-by-State Economics 2026 | Reclimatize.in
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Aluminium · Electricity Market · EconomicsOpen Access Renewable Procurement for Indian Aluminium Smelters: What the Economics Look Like State by State
Approximately 80% of India’s aluminium sector emissions come from captive coal power plants. The decarbonisation pathway is clear — switch to renewable electricity. The question that actually determines whether and how fast that switch happens is not the solar tariff. It is the layered structure of open access charges, state-level regulatory decisions and transmission rules that determine what a renewable unit actually costs when it arrives at a smelter in Jharsuguda or Korba. That landed cost varies significantly from state to state — and it determines which producers have a viable path to green aluminium today and which do not.
India’s four major aluminium producers — Vedanta, Hindalco, NALCO and BALCO — have committed a combined USD 5 billion to building 20 GW of renewable energy capacity by 2030. JMK Research estimates the sector will integrate 18 to 20 GW of solar and wind by 2030, requiring an investment of approximately USD 5 billion. The ambition is real. The state-level regulatory environment is the limiting factor.
The landed cost of open access renewable electricity for a smelter is not the solar tariff. It is the solar tariff plus cross-subsidy surcharge, plus wheeling charges, plus transmission charges, minus any state-level exemptions. In Odisha, where most of India’s aluminium is produced, this total can add Rs 1.30 to Rs 5.27 per unit on top of the generation cost, depending on the DISCOM and voltage level. In Chhattisgarh, where BALCO operates, the open access regime for renewables is among the most favourable in India.
The ISTS waiver for renewable energy is the most important central-level enabler for open access procurement by aluminium smelters. It exempts cross-state renewable electricity from inter-state transmission charges — savings of Rs 0.40 to 0.60 per unit. The waiver currently applies to projects commissioned up to December 2026. Its renewal beyond that date is a critical policy decision for the industry.
NALCO’s decision in February 2026 to sign an MOU with NLCIL for a 1,080 MW thermal captive power plant — while simultaneously planning a 500,000-tonne brownfield smelter — is the most striking illustration of how the coal-coal CPP model persists even as the decarbonisation imperative grows. As a government-owned entity, NALCO faces different governance constraints than private producers. Its CMD acknowledged publicly in January 2026 that the sector is not prepared for a green transition.
The CCTS adds a new compliance dimension to electricity procurement decisions. Under the CCTS’s gate-to-gate methodology covering both Scope 1 and Scope 2 emissions, every unit of coal-based CPP power consumed by an obligated aluminium smelter adds to its GHG emission intensity and potentially its compliance shortfall — meaning the financial case for renewable procurement now has both a cost and a compliance dimension simultaneously.
CBAM currently covers only Scope 1 direct process emissions for aluminium — not the indirect electricity emissions that constitute 80% of the sector’s carbon footprint. The European Commission has committed to expanding coverage to indirect emissions. When that expansion arrives, the financial calculus for coal CPP dependence changes fundamentally. Producers who have built renewable procurement infrastructure before that moment will have a lasting cost and market access advantage.
Why electricity is the aluminium decarbonisation problem
Aluminium is made through the Hall-Héroult electrolytic process — passing electric current through molten aluminium oxide to separate aluminium from oxygen. The process consumes approximately 14 to 15 MWh of electricity per tonne of aluminium produced. There is no viable low-electricity alternative at commercial scale. The Hall-Héroult process has been the commercial standard for 140 years and will remain so for the foreseeable future. Electricity is not an input that can be substituted — it is the process itself.
This makes aluminium’s decarbonisation pathway uniquely clear relative to other hard-to-abate sectors like steel or cement. There is no equivalent of green hydrogen or carbon capture to engineer. The solution is simply to change where the electricity comes from. In India, that means replacing coal-based captive power — which currently accounts for approximately 80% of the sector’s electricity supply — with renewable electricity sourced through open access or dedicated captive generation. The economics of doing that are determined not by the technology but by the regulatory and commercial infrastructure around electricity procurement.
Electricity accounts for over 30% of total aluminium production cost. The difference between Rs 6.50 per unit from a coal captive power plant and Rs 4.00 per unit from a wind-solar hybrid PPA is approximately Rs 2.50 per unit — which, at 14.5 MWh per tonne, translates to approximately Rs 3,625 per tonne of aluminium in production cost savings. At current LME aluminium prices of approximately USD 2,700 per tonne (approximately Rs 2.27 lakh per tonne), that is a 1.6% production cost saving — meaningful at commodity margins.
Understanding the landed cost structure
The solar tariff is the starting point, not the endpoint, of the landed cost calculation for open access renewable electricity. Every unit of renewable power that travels from a generator in Rajasthan to a smelter in Jharsuguda passes through a layered charge structure that is set by a combination of central policy and state regulatory commissions. Understanding that structure is essential before evaluating which states offer viable open access economics for aluminium smelters.
| Cost Component | Who Sets It | Typical Range | Notes |
|---|---|---|---|
| Solar / wind generation tariff | Competitive auction discovery | Rs 2.20–2.80/kWh | Wind-solar hybrid with storage: Rs 3.50–4.50/kWh |
| ISTS transmission charge | CERC (waived for RE) | Rs 0 (with ISTS waiver) | Waiver applies to projects commissioned up to Dec 2026; without waiver, Rs 0.40–0.60/kWh |
| Intra-state transmission charge | State transmission utility | Rs 0.15–0.40/kWh | Varies by state; Odisha Policy 2022 gives 25% waiver on OA charges for in-state RE |
| Wheeling charge (DISCOM) | State Electricity Regulatory Commission | Rs 0.28–1.74/kWh | Highest variability across states; Odisha ranges from Rs 1.02 to Rs 1.74/kWh across DISCOMs |
| Cross-subsidy surcharge (CSS) | State Electricity Regulatory Commission | Rs 0 to Rs 3.56/kWh | Widest variable; Chhattisgarh charges 50% of normal CSS for RE; Odisha EHT range Rs 1.61–3.56/kWh |
| System losses (in-kind) | State norms | 3–8% | Paid as a percentage of energy rather than cash; EHT typically 3%, HT typically 8% |
| Banking / scheduling charges | State SLDC | Rs 0.01–0.05/kWh | Minor but adds to total |
| Approximate total landed cost range for a well-structured open access renewable deal at EHT for an aluminium smelter: Rs 3.50 to Rs 6.50/kWh depending on state, DISCOM and policy incentive eligibility | |||
The table makes one structural point clearly: the generation tariff — the Rs 2.20 to 2.80 per unit that solar achieves at auction — is often less than half the landed cost. The gap is filled by wheeling, surcharges and transmission charges that vary enormously by state. A producer in a favourable regulatory environment pays Rs 3.50 to 4.00 per unit landed. A producer in a restrictive environment pays Rs 5.50 to 6.50 per unit — comparable to or higher than their existing coal CPP cost. The state-level regulatory environment is as important as the underlying renewable resource.
State by state — where India’s smelters operate and what they face
Odisha produces over 50% of India’s primary aluminium and hosts the Vedanta Jharsuguda smelter (India’s largest at ~1.75 MTPA) and NALCO’s Angul smelter (460,000 TPA). The state’s open access regulatory environment is complex — the OERC’s FY 2025-26 tariff order retained existing charges unchanged, with significant variation across the four private DISCOMs. At EHT level, cross-subsidy surcharges range from Rs 1.61/kWh (TPWODL) to Rs 3.56/kWh (TPSODL), and wheeling charges from Rs 1.02/kWh (TPCODL) to Rs 1.74/kWh (TPSODL). A smelter in TPSODL territory faces a combined wheeling-plus-CSS burden of approximately Rs 5.27/kWh at EHT — which, added to a solar tariff of Rs 2.50/kWh, yields a landed cost of Rs 7.77/kWh. That is substantially above coal CPP economics of approximately Rs 4.50 to 5.50/kWh and makes open access procurement financially unattractive without exemptions.
The saving grace is the Odisha Renewable Energy Policy 2022, which provides significant incentives for in-state renewable energy projects: a 50% CSS exemption, a 25% wheeling charge exemption, and a Rs 0.20/kWh exemption on OPTCL transmission charges — all valid for 15 years (extended by 5 years for projects commissioned before March 2026). For a producer sourcing from an in-state RE project and qualifying for these exemptions, the effective CSS burden drops substantially. The OERC’s April 2025 tariff order confirmed these incentives continue unchanged. Critically, the OERC also confirmed that no additional surcharge would be imposed on open access users beyond the CSS — a consumer-friendly provision that limits downside.
The practical constraint is that Odisha’s installed renewable energy capacity is only 2.9 GW as of December 2024 — a fraction of what the aluminium sector alone will need. The state’s 10.95 GW vision by 2029-30 provides a credible pipeline, but sourcing large blocks of in-state renewable power for smelter base-load is a 2027 to 2030 story, not an immediate one. For near-term procurement, ISTS-waiver-enabled cross-state purchases from Rajasthan and Tamil Nadu remain more practical — with the exemption benefit lost but the larger supply pool available.
Chhattisgarh offers the most favourable open access regulatory environment for renewable energy in any major aluminium-producing state in India. The Chhattisgarh Electricity Regulatory Commission has taken a structurally generous approach to RE open access: no cash transmission or wheeling charges for intra-state open access renewable transactions — only energy losses of 6% in kind. The cross-subsidy surcharge for open access solar power is set at 50% of the general CSS determined for the year, rather than the full rate. This means the all-in additional charge burden for a smelter procuring intra-state solar in Chhattisgarh is dramatically lower than in Odisha. The regulatory generosity reflects the state’s strategy of attracting industrial renewable investment alongside its heavy industrial base.
BALCO, part of the Vedanta Group and operating at approximately 1 MTPA of smelting capacity at Korba, is the primary aluminium beneficiary of this favourable regime. The Korba complex runs on coal-based captive power — but the Chhattisgarh open access framework means that transitioning to open access solar or wind-solar hybrid is significantly more economical there than in Odisha. BALCO’s expansion to 1 MTPA completed by Vedanta in 2025 positions it as one of the most commercially interesting candidates for large-scale RE integration, precisely because the state regulatory environment is supportive and BALCO can build a 2030 renewable energy procurement strategy on competitive landed costs.
The limitation is Chhattisgarh’s own renewable resource base, which is less abundant than Rajasthan or Gujarat. Cross-state procurement through the ISTS waiver supplements in-state supply, particularly from Rajasthan solar.
Rajasthan and Gujarat are not smelter states — they are supply states. India’s cheapest solar power comes from Rajasthan, where irradiation is among the highest in the world and utility-scale solar tariffs have been discovered below Rs 2.20/kWh in competitive auctions. The ISTS waiver makes this power economically accessible to aluminium smelters in Odisha, Chhattisgarh and elsewhere — eliminating the inter-state transmission charge of Rs 0.40 to 0.60/kWh that would otherwise make long-distance procurement uncompetitive. Without the waiver, the economics of Rajasthan-to-Odisha power procurement deteriorate significantly.
Gujarat adds a coastal wind dimension — offshore wind development zones identified off the Gujarat coast open the prospect of consistent, high-capacity-factor wind power to complement solar. The RMI analysis of green hydrogen production in India found Gujarat and Maharashtra offering some of the most attractive renewable economics for large industrial consumers, driven by state policy, grid infrastructure and proximity to ports.
The ISTS waiver renewal beyond December 2026 is the single most important policy decision for cross-state aluminium renewable procurement. If the waiver is not renewed — or renewed only partially — the landed cost of Rajasthan solar at an Odisha smelter rises by Rs 0.40 to 0.60/kWh, making it potentially less attractive than in-state alternatives or coal CPP. Every procurement contract that smelters are currently structuring for the late 2026 and 2027 commissioning window needs to account for this uncertainty.
Jharkhand hosts part of Hindalco’s upstream operations and has historically had lower open access charges than Odisha — consistent with the Forum of Regulators survey which ranked Jharkhand, Chhattisgarh and Andhra Pradesh as states with lower total open access charges for HT industrial consumers. However, Jharkhand’s renewable energy penetration is only approximately 8% of procurement mix, and the state’s grid infrastructure for large-scale industrial open access remains underdeveloped compared to Odisha or Gujarat. IEEFA’s Indian States’ Electricity Transition (SET) 2026 report placed Jharkhand among states requiring foundational interventions. Hindalco’s Jharkhand facilities will likely rely on ISTS-waiver cross-state procurement as the primary mechanism for renewable integration, supplemented by captive solar development as the state’s grid matures.
The NALCO contradiction — a case study in competing imperatives
No single development better illustrates the structural tensions in India’s aluminium decarbonisation than NALCO’s February 2026 decision. On 15 February 2026, the National Aluminium Company Ltd signed an MOU with NLC India Ltd for the development of a 1,080 MW thermal captive power plant — a coal-fired power project — alongside exploration of renewable energy opportunities. This is the same NALCO whose CMD acknowledged publicly in January 2026 that the aluminium sector is not prepared for the green transition.
NALCO is planning a 500,000-tonne brownfield smelter expansion at Angul, expected to be operational by 2030. Its existing 1,200 MW captive coal power plant will not be sufficient for the expanded smelter — hence the new 1,080 MW thermal project with NLCIL. The economics of coal-based CPP for a government-owned PSU, where power security and cost predictability are board-level priorities and where renewable procurement requires navigating complex governance processes, make coal the path of least resistance.
The NALCO case is important not because it is an outlier but because it is representative of a structural pattern. Coal-based captive power provides NALCO with fully controlled, reliable electricity at approximately Rs 4.50 to 5.50 per unit — close to what open access renewable landed costs under realistic Odisha charges. The carbon argument — CCTS compliance, CBAM exposure, green aluminium premium — has not yet moved far enough in financial terms to reverse that calculation for a government PSU whose mandate includes energy security alongside commercial returns.
IEEFA estimates that an asset with a 30 to 40-year operating life, commissioned in 2026 or 2027, will still be operational in 2056 or 2057 — deep into India’s net-zero 2070 window. The stranded asset risk is real, but it is a 2040s-2050s problem for a government-owned entity whose planning horizon is typically three to five years. This is where the policy design of the CCTS, the Green Public Procurement mandate and eventually Scope 2 CBAM inclusion matter — they need to create a financial incentive that is visible over a 3-to-5-year planning horizon, not a 20-year one.
For CCTS-obligated aluminium smelters, the financial case for open access renewable procurement now has two components that compound each other. The first is the direct electricity cost saving — if renewable power lands at Rs 4.00 per unit versus coal CPP at Rs 5.00 per unit, that saves Rs 3,625 per tonne at 14.5 MWh/tonne. The second is the CCTS compliance cost avoided — under the gate-to-gate methodology, every unit of coal-based CPP power consumed adds to the smelter’s Scope 2 GHG emission intensity and potentially its Carbon Credit Certificate shortfall. If the CCC price is Rs 200 per tonne of CO₂e and a smelter’s CPP emits approximately 0.9 kg CO₂ per kWh, switching 14.5 MWh per tonne from coal to renewable reduces the CCTS compliance cost by approximately Rs 2,610 per tonne (0.9 × 14.5 × 1,000 × 200 ÷ 1,000). Together, both components make the financial case stronger than electricity cost alone — and neither existed as a compliance reality five years ago.
The wind-solar hybrid solution — and why it matters for smelters specifically
Aluminium smelting is a 24-hour, 365-day operation. The electrolytic cells cannot be switched off without significant productivity and capital cost implications — a pot once cooled can take weeks and significant expenditure to bring back to full production. This continuous load requirement is the primary reason that simple solar power — which generates only during daylight hours — is not a straightforward solution for smelters, despite being the cheapest source of renewable electricity.
Wind-solar hybrid projects address this directly. A hybrid project combining wind (which generates more strongly in the evenings and during monsoon) with solar (which generates strongly during the day) delivers electricity across more hours of the day than either source alone — significantly improving the profile match with smelter load. JMK Research identifies wind-solar hybrid as the most suitable renewable pathway for aluminium smelters, and the falling cost of battery energy storage is making combined WSH-plus-storage solutions increasingly viable for 24-hour supply.
The emerging commercial structure for aluminium-linked renewable procurement is the round-the-clock (RTC) PPA — a long-term power purchase agreement that commits a developer to delivering a guaranteed quantity of power at any time of the day, achieved through a combination of wind, solar and battery storage. RTC contracts typically cost Rs 3.50 to 4.50 per kWh — more than simple solar but still significantly below coal CPP economics once the CCTS and CBAM dimensions are incorporated. Vedanta, Hindalco and BALCO are all exploring or signing RTC PPAs as part of their 20 GW collective commitment.
JMK Research warns that the ALCM (Approved List of Cells and Manufacturers) implementation from June 2026 could hamper the execution of 20 to 25 GW of green open access projects over the next two to three years — as domestic content requirements create a shortage of qualifying solar modules and push project tariffs up by Rs 0.40 to 0.50 per unit. This is a real near-term headwind for aluminium smelters trying to commission open access renewable projects through 2026 and 2027. Producers structuring procurement contracts now should factor ALCM compliance requirements and the associated cost uplift into project economics, and ensure that force majeure provisions and tariff adjustment mechanisms appropriately allocate the policy risk.
The CBAM Scope 2 horizon — and why early movers build lasting advantage
CBAM currently covers only Scope 1 direct emissions from aluminium electrolysis — the fluoride and CO₂ emissions from the smelting process itself. The CBAM benchmark of 1.55 tCO₂/t for aluminium electrolysis means Indian smelters’ initial exposure is moderate. For a smelter at the Indian average Scope 1 intensity, the current CBAM levy is manageable — tens of euros per tonne rather than hundreds.
But the European Commission has committed to expanding CBAM’s coverage to indirect electricity emissions as soon as possible. When that expansion arrives — potentially within the current decade — the financial calculation for Indian aluminium producers changes completely. The 80% of emissions that currently sit outside CBAM’s scope will move inside it. A smelter running on coal-based CPP at approximately 0.9 kg CO₂/kWh and consuming 14.5 MWh per tonne produces approximately 13 tCO₂ per tonne in Scope 2 electricity emissions alone — entirely unpriced under current CBAM rules. At an EU ETS carbon price of €65/t, the full Scope 2 CBAM levy on that coal CPP power would be approximately €845 per tonne of aluminium — transforming the economics completely.
CarbonChain, cited in the aluminium sector analysis, estimates that CBAM’s expansion to indirect electricity emissions could increase average CBAM costs for metals importers by up to 500%. That is the financial cliff that Indian aluminium producers face if they have not substantially decarbonised their electricity supply before the Scope 2 expansion arrives. Producers who build renewable procurement infrastructure now — through the open access route in favourable states, through dedicated captive generation, or through ISTS-waiver cross-state PPAs — are not just managing near-term costs. They are insuring against a future regulatory event whose specific timing is uncertain but whose direction is not.
The producers who reach 30% renewable share by 2030 — as Vedanta has committed — will have a structural cost and market access advantage in EU markets that late movers cannot replicate quickly. The regulatory, procurement and grid connection infrastructure takes years to build. The time to build it is now, while the cost is manageable and the ISTS waiver is available.
Frequently Asked Questions
What is the actual landed cost of open access renewable electricity for an aluminium smelter in Odisha today?
It depends heavily on the DISCOM zone and whether the project qualifies for Odisha RE Policy 2022 exemptions. Without exemptions, an EHT consumer in a TPSODL area faces wheeling charges of Rs 1.74/kWh plus CSS of Rs 3.56/kWh plus intra-state transmission and losses — adding approximately Rs 5.30 to 5.60/kWh on top of a generation tariff of Rs 2.50/kWh, yielding a landed cost of approximately Rs 7.80 to 8.10/kWh. That is uncompetitive versus coal CPP. With the Odisha RE Policy 2022 exemptions — 50% CSS reduction and 25% wheeling reduction — the additional charge burden drops to approximately Rs 2.70 to 3.20/kWh, yielding a total landed cost of approximately Rs 5.20 to 5.70/kWh. In TPWODL or TPCODL territory, the base charges are significantly lower, making the economics more attractive even without exemptions.
Why is Chhattisgarh’s open access regime so much more favourable for renewables?
The Chhattisgarh Electricity Regulatory Commission has taken a policy decision to charge no cash wheeling or transmission charges for intra-state open access renewable energy — only energy losses of 6% in kind. The cross-subsidy surcharge is set at 50% of the general rate for solar power. This makes Chhattisgarh’s effective additional charge burden for renewable open access significantly lower than Odisha, Maharashtra or most other states. The policy was maintained consistently and reflects the state government’s strategy of encouraging industrial renewable investment alongside Chhattisgarh’s heavy industrial base. BALCO in Korba benefits directly from this regime.
What happens to cross-state renewable procurement if the ISTS waiver is not renewed after December 2026?
The ISTS waiver currently exempts renewable energy from inter-state transmission charges of Rs 0.40 to 0.60/kWh. Without the waiver, the landed cost of Rajasthan solar at an Odisha or Chhattisgarh smelter rises by that amount — potentially pushing cross-state procurement above the cost threshold where in-state alternatives or coal CPP are competitive. The Ministry of Power has repeatedly extended the waiver in the past; its renewal beyond December 2026 is expected but not yet confirmed. Producers building procurement contracts around cross-state renewable supply need to build the waiver expiry risk into contract terms through appropriate tariff-floor provisions.
How does the CCTS Scope 2 coverage affect the open access renewable calculation?
The CCTS covers both Scope 1 and Scope 2 GHG emissions under its gate-to-gate methodology. For an aluminium smelter with a coal-based CPP at approximately 0.9 kg CO₂/kWh, consuming 14.5 MWh per tonne of production, the Scope 2 emissions are approximately 13 tCO₂/t. Under CCTS intensity targets, these Scope 2 emissions count toward the smelter’s total GHG intensity. Switching to renewable electricity reduces that intensity by approximately 13 tCO₂/t — with the CCC cost equivalent depending on the carbon market price. At an initial CCC price of Rs 200/tCO₂e, the compliance cost saving from renewable procurement is approximately Rs 2,600 per tonne of aluminium — a meaningful additional financial incentive on top of the direct electricity cost saving.
Why hasn’t NALCO moved faster on renewable energy despite having the clearest carbon risk?
NALCO faces governance constraints that private producers like Vedanta and Hindalco do not. As a Central Public Sector Enterprise under the Ministry of Mines, NALCO’s capital allocation decisions require multi-level government approval, with energy security and cost predictability weighted heavily alongside sustainability. Coal-based CPP provides certainty — predictable fuel supply from government coal blocks, known technology, established operating procedures. Open access renewable procurement requires navigating state regulatory approvals, entering long-term PPAs with private developers, and managing variability through storage — all of which introduce uncertainties that government-owned entities are structurally averse to. The NALCO-NLCIL MOU for the 1,080 MW thermal plant is rational given these constraints, even as it is strategically problematic given the long-term decarbonisation trajectory.