Energy Efficiency vs New Renewable Capacity: Why Industries Are Rethinking Their Energy Strategy

For the last decade, India’s industrial energy strategy has been defined by one dominant trend:
Add more renewable capacity — especially solar — to reduce energy cost and improve competitiveness.

But a quiet shift is underway.

In field conversations across Gujarat, Maharashtra, Rajasthan and beyond, CXOs and plant heads are increasingly confronting a new reality:

“We don’t just need more energy — we need to use it better.”

Energy efficiency is no longer a support function.
It is becoming a core strategic lever, often delivering faster ROI, lower capex, and higher productivity than adding new captive solar or other renewable assets.

This blog breaks down why this shift is happening, what industries are experiencing, and how decision-makers can build an integrated efficiency + renewable strategy for FY 2025–30.

1. The Industrial Energy Landscape is Changing—Fast

India’s energy demand from industries continues to grow 4–6% annually.
At the same time, industrial tariffs—especially in states like Gujarat—have risen consistently due to:

• Higher power procurement cost for DISCOMs

• Renewable balancing obligations

• Growing cross-subsidy burden

• Transmission surcharge increases

• DISCOM financial losses

Meanwhile, solar project capex fell from ₹6.5–6.8 crore/MW in 2017 to ₹3.4–3.7 crore/MW in 2023–24, before rising slightly again due to BCD, ALMM and supply-side constraints.

This resulted in a generation cost of ₹2.2–₹3.0/kWh for most captive solar plants vs ₹7–₹10/kWh grid tariffs.

Naturally, industries chased new solar capacity.

But over the last 18–24 months, many CXOs are recognising a hard truth:

The cheapest kWh is not the one you generate — it’s the one you don’t need.

2. What We Hear From CXOs & Plant Heads (From Field Interactions)

Across more than 80+ conversations in the last few quarters, similar statements keep surfacing:

• “We know solar saves money, but internal inefficiencies cost more than we realise.” — COO, Chemicals

• “Our baseline itself is wrong; any new investment on top of this becomes inefficient.” — Director, Engineering

• “Our compressors run like they’re powering a township.” — Maintenance Head, FMCG

• “If we optimise demand first, we may reduce solar sizing by 15–20%.” — CFO, Packaging

• “Switching OFF machines is a bigger cultural challenge than financing solar.” — Plant Head, Metals

These are not isolated views — they reflect a systemic pattern.

3. What Audits and EMS Deployments Reveal

Across industries, the same inefficiencies appear repeatedly — regardless of sector

Common inefficiency patterns

• Motors oversized beyond design load

• Compressors running at full pressure at 40–60% load

• Pumps throttled instead of controlled via VFDs

• Steam/air leakage treated as “normal loss”

• Idle load running 24×7 due to operational habits

• Poor shift-level energy productivity visibility

• Zero correlation of process load vs energy draw

• Tariff optimisation not synchronised with operations

Impact

These inefficiencies typically account for 8–22% unnecessary energy consumption, directly inflating:

• Energy bills

• O&M cost

• Solar sizing requirement

• BESS sizing and ROI

• Equipment wear and tear

• Process losses

In many cases, the value of correcting inefficiencies equals 300 kW to 1 MW worth of solar benefits.

Case Insight

A mid-sized plastics plant in Gujarat discovered:

• Compressor optimisation alone saved ₹26 lakh annually

• Equivalent solar capacity required to save this amount: 300–350 kW

• Cost of compressor optimisation: <₹3 lakh

• Payback: <30 days

4. Why Energy Efficiency Delivers Higher ROI Than New Capacity

4.1 The payback advantage

• Solar payback: 3.5–4.5 years

• BESS payback: 5–7 years

• Energy efficiency payback: 0–12 months

Efficiency interventions are often:

• Low capex

• Quick to implement

• Policy-independent

• Approval-free

• Process-integrated

4.2 It strengthens your baseline

Every additional MW of renewable capacity is sized on today’s demand curve.

But if that baseline is inflated by inefficiencies, industries risk:

• Oversizing solar

• Oversizing BESS

• Oversizing cables, structures, and transformers

• Increasing capex unnecessarily

A simple 10% reduction in baseline lowers:

• Solar capex by 10%

• BESS capex by 10–12%

• Balance-of-system cost by 8–10%

4.3 Efficiency makes your renewables smarter

When energy demand is optimised:

• Solar generation matches load better

• Banking losses reduce

• Grid-dependency becomes predictable

• BESS requirement becomes minimal

5. The Gujarat Factor: Why Efficiency Matters Even More

Gujarat’s solar setoff calculations are based on:

• 15-minute ABT generation
  vs

• 15-minute consumption

After deducting RTS adjustments, only 30% of net imported units qualify for banking.

This means matching load profiles with generation becomes as critical as the plant size itself.

Where EMS changes the game

A well-deployed EMS gives:

1. 15-min consumption visibility

2. 15-min solar generation (ABT meter) integration

3. Load–generation alignment analysis

4. Banking loss estimation

5. Correct solar capacity sizing

6. Shift-level energy productivity

7. Tariff-based scheduling insights

Result:
Industries can optimise solar sizing scientifically, not blindly.

6. A New Decision Framework for Industrial Energy Leaders (2025–2030)

Based on real conversations with CXOs and plant heads, the new decision-making framework includes:

Step 1: Fix the baseline first

• Conduct energy audit

• Deploy EMS / real-time monitoring

• Identify process inefficiencies

• Quantify load reduction potential

Step 2: Redesign the demand curve

• Optimise compressors, motors, pumps

• Eliminate idle loads

• Introduce automation where feasible

Step 3: Recalculate solar/BESS capacity

• Use corrected demand curve

• Use 15-minute policy-aligned data

• Analyse banking losses

• Run dual-scenario LCOE

Step 4: Phase investments

• Efficiency first

• Solar second

• BESS third (where needed)

Step 5: Monitor continuously

Efficiency is not a one-time event; it is a culture shift driven by data.

7. The Road Ahead: Integrated Energy Strategy Will Define Competitiveness

Industrial competitiveness in India will increasingly depend on:

• Cost of energy per unit output

• Ability to optimise processes

• Ability to use renewable energy effectively

• Operational resilience

• Predictable energy economics

Energy efficiency is no longer just an option — it is a competitive advantage.
Industries that optimise first and scale capacity next will see:

• Higher ROI

• Lower capex

• Lower operational volatility

• Higher productivity

• Better long-term sustainability metrics

Conclusion

India’s industrial energy transition is shifting from:

“Add more energy” → “Use energy better” → “Integrate both intelligently.”

Energy efficiency is emerging not as a complement but as a driver of renewable energy decisions.

And the industries that recognise this early will lead the next decade of industrial competitiveness.