Nagpur-headquartered Sunflag Iron and Steel will procure power from an 11 MW solar project being set up by Sunsure Energy’s special purpose vehicle Sunsire Solarpark Thirty Seven in Dhule, Maharashtra.

The two companies entered into a long-term power purchase agreement which will enable Sunflag Iron and Steel to source solar power from the under-construction project in captive mode for 25 years.

Sunflag has also executed a share subscription and shareholders’ agreement with Sunsure Energy to invest ₹57.25 million (~$668,085) to acquire and maintain a 26% equity stake in the power producer.

The subscription to the equity shares will occur in tranches.

Regulatory approvals are not applicable for this arrangement.

Sunsure Solarpark Thirty Seven develops, constructs, operates, and maintains power projects in India.

As part of its ESG goals, Sunflag has been entering into agreements with renewable energy companies to meet its power needs and reduce its carbon footprint. In 2023, Sunflag entered into long-term power delivery agreements with ReNew Power’s three special purpose vehicles by acquiring a 31.2% stake each to source 71.34 MW of solar power for 15 years, extendable up to 25 years.

Several companies in the hard-to-abate steel industry are transitioning to renewable energy to bring down emissions and be globally competitive. The emissions intensity of steel produced in India is 2.54 tons of CO2/ ton, significantly higher than the global average of 1.91. The steel industry accounts for 10-12% of India’s total emissions.

The Indian steel sector’s decarbonization efforts have acquired more urgency in the wake of the European Union’s Carbon Border Adjustment Mechanism (CBAM), which seeks to put a ‘fair price’ on the carbon emitted during the production of carbon-intensive goods entering the EU and encourage cleaner industrial production in non-EU countries.

The transitional phase of CBAM, which started on October 1, 2023, will continue until the end of 2025.

Recently, Jindal Stainless’s subsidiary, JSL Super Steel, announced it will procure 11 MW of power from Sunsure Energy’s 49 MW solar project in Augasi, Uttar Pradesh. The company said this agreement will help it meet 40% of its energy needs through clean power.