Market Cautiously Optimistic About Andhra Pradesh’s Open Access Solar Prospects
The state was ranked fourth on solar open access capacity installations in Q3 2022
A revival of interest from the industry in Andhra Pradesh to source solar energy through open access has seen installations surge by 450% quarter-over-quarter (QoQ) to 75.3 MW in the third quarter (Q3) of the calendar year (CY) 2022.
The open access capacity addition has been boosted by faster approvals from state-owned power distribution companies (DISCOMs).
Further, the high DISCOM tariffs have pushed industries to adopt solar open access in large numbers. The C&I entities have been increasingly opting for captive and group captive projects for solar open access due to significant savings on energy costs.
“Earlier, approvals were not being granted for open access projects in Andhra Pradesh, which was one of the reasons why the developers lost interest. However, with a change in DISCOMs’ approach combined with high retail tariff, there is a renewed interest in open access solar projects,” said a top executive of a leading open access developer.
Textile, cement, and battery manufacturing units were the primary open access consumers in the state during the quarter.
Andhra Pradesh was fourth on the list of solar open access installations in Q3 2022.
The top five states accounted for 83% of the total installations during the quarter.
The numbers were revealed in the Mercom India Solar Open Access Market Report Q3 2022.
Energy cost matrix
The captive and group captive mode of solar open access can cut down the energy cost to as low as ₹2 (~$0.024)/kWh, which is 26% to 37% of the retail tariff, depending on the type of consumer. The massive reduction in tariff makes the energy procurement solutions instantly attractive for C&I consumers even with the upfront investment.
“The open access charges include the cross-subsidy surcharge and the additional surcharge, but these charges are not applicable for captive projects. This is one of the main reasons for the growth of open access, especially captive projects,” a developer who has executed projects in the state said.
For FY23, the Andhra Pradesh Southern Power Distribution Company (APSPDCL) has set a cross-subsidy surcharge of ₹2.60 (~$0.032)/kWh for 33 kV commercial consumers. It is 4% higher than ₹2.50 (~$0.031)/kWh set by the Andhra Pradesh Eastern Power Distribution Company (APEPDCL) for 132 kV commercial consumers.
The prevalent retail electricity tariff (FY23) in the state ranges between ₹7 (~$0.085)/kWh and ₹7.65 (~$0.093)/kWh for the C&I segment.
When third-party open access projects are considered, the average solar open access tariff goes up to around ₹5.29 (~$0.064)/kWh. This mode is more expensive as it includes a cross-subsidy surcharge and an additional surcharge for using DISCOM infrastructure to wheel power.
Even under the third-party model, the average tariff is nearly 25% lower than the lowest retail tariff for commercial consumers. Third-party solar open access provides an option for businesses not keen on investing in solar projects but still want to procure green energy.
“Andhra Pradesh offers banking facility, which is also playing its part in facilitating the growth of solar open access in the state,” another developer said.
The momentum in solar open access growth in the last quarter is likely to be sustained by Andhra Pradesh, considering the state’s large project pipeline.
The pipeline capacity entirely belongs to a project being developed by the Greenko Group.
Rajasthan and Karnataka were next in terms of the pipeline at the end of Q3 2022, with the top three states accounting for 66% of the total project pipeline.
In terms of cumulative installations, Andhra Pradesh became the fifth largest state, with a share of 6.5% of the total installations in the country as of September 2022, surpassing Rajasthan.
“Things have been improving in Andhra Pradesh in terms of open access installations, but it will take a while before it catches up with states like Karnataka and Maharashtra. While the state is trying its best to position itself as one of the favored destinations of open access solar, there is still some skepticism regarding long-term open access approvals by DISCOMs,” said an executive from another developer.
The state has a good potential for the growth of open access in the near future. However, the cross-subsidy surcharge of ₹2.60 (~$0.032)/kWh and the DISCOMs’ reluctance to give quicker approvals for long-term open access might compromise future growth prospects.
The Mercom India Solar Open Access Market Report Q3 2022 covers a detailed analysis of state policies and regulations related to solar open access and covers vital information and data on the market.
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