An inconvenient truth could potentially hinder Tamil Nadu’s industrial growth. The state may face limitations not from finance, logistics, or labor, but from restricted access to reliable and risk-adjusted clean power. As global supply chains increasingly prioritize low-carbon manufacturing, access to dependable and verifiable renewable electricity is critical for competitiveness, particularly for export-oriented units and micro, small, and medium enterprises (MSMEs).
Tamil Nadu stands as one of India’s foremost manufacturing and export-driven states and has developed into a significant hub for renewable energy production. Its Circular Economy Investment Policy 2026 shows a heightened awareness of global sustainability and carbon disclosure standards, including initiatives like the EU’s Carbon Border Adjustment Mechanism.
MSMEs, which are essential to Tamil Nadu’s industrial landscape, confront ongoing challenges. These businesses often lack the scale and institutional resources necessary to secure clean power through the complex, long-term renewable energy contracts available in the market. The issue surpasses mere electricity pricing; there is a pressing need for power that ensures price certainty, supply reliability, contractual stability, and verifiable low-carbon or carbon-free energy throughout the production chain.
Moreover, many MSMEs do not possess the internal capabilities to navigate environmental, social, and governance framework requirements, exposing them to various risks. Tamil Nadu is already home to one of the largest clusters of renewable-powered industries in India, especially those with captive installations and power demands of 0.5 MW or more. Current mechanisms such as the Green Day-Ahead Market and the Green Term-Ahead Market, available through power exchanges, enhance renewable energy accessibility. However, they predominantly serve as transactional platforms that fail to fully meet the requirements of MSMEs or export-oriented industries.
Aggregating Demand
To achieve its ambition of becoming a global manufacturing hub, Tamil Nadu must shift focus from merely increasing renewable capacity to establishing institutional mechanisms that enhance access to risk-adjusted green power.
Firstly, the state could explore a green energy marketplace that aggregates demand from MSMEs, facilitating access to lower-cost, standardized renewable power contracts linked to open-access and power exchange frameworks. Such aggregation can strengthen negotiating power, mitigate counterparty risk, and provide better access to verifiable clean energy.
Secondly, Tamil Nadu should integrate net-zero targets into new investment projects during the detailed project report phase. Incorporating clean energy procurement and establishing emissions baselines within project planning can enhance bankability and access to climate-aligned financing.
Finally, the state may consider developing a green investment tracker to compile industrial data on energy consumption, renewable adoption, and emissions intensity. This mechanism could mitigate information asymmetry, bolster green investment readiness, and serve as a pre-due diligence tool for investors assessing climate-aligned manufacturing ecosystems.
Beyond Cost Factor
The competitiveness of industries will increasingly depend not only on costs but also on the capacity of firms to demonstrate how their production processes are powered. Through institutional and market innovations, Tamil Nadu can transition into a globally competitive, low-carbon manufacturing hub.
(The writer is a former policy director (India) at GWEC and a former fellow at TERI. The views expressed are personal.)
Published on May 11, 2026
