Favorable Policies Spark Solar Open Access Growth Across India

Clarity regarding captive project ownership is the reason behind open-access growth


India achieved 1.8 GW of solar open access capacity in the first quarter of 2024, doubling from 909.3 MW in Q4 2023, according to the Q1 2024 Mercom India Solar Open Access Market Report. Installations increased by 152% year-over-year.

Implemented by the Ministry of Power, Green Energy Open Access Rules have enabled consumers with a total contracted demand or sanctioned load of 100 kW or above to utilize green energy through open access. The earlier limit was 1 MW.

“Reducing the limit to 100 kW created new opportunities, especially for small businesses looking to purchase renewable energy. Consumers are increasingly transitioning to clean energy for various reasons, including sustainability practices, cost reduction, and meeting the demands of investors and buyers emphasizing greener supply chains, particularly for export markets,” noted a prominent open access developer.

Regulatory Support

There was uncertainty in the industry about what defines group captive open access projects and their ownership. The Supreme Court eventually ended this confusion last year. It said that for a group of individuals to be considered captive users, they must collectively own 26% of the project and jointly consume at least 51% of the electricity generated annually.

These clarifications have paved the way for a stable investment environment. They allow corporate buyers to access the benefits of green open access in captive mode at a low landed power cost with minimum investment.

Enabling Policy Environment

The adoption of Green Energy Open Access Rules in various states has boosted the growth.

For instance, Odisha, which houses large industries and is mandated to fulfill renewable purchase obligations owing to the captive thermal plants used to run their facilities, has started to look at solar open access.

“The state provides a 50% exemption on the cross-subsidy surcharge for 15 years from project commissioning dates and a ₹0.20 (~$0.0024)/kWh exemption on state transmission utility charges for 15 years for developing open access solar projects. If a project is completed by March 31, 2026, the exemption on STU charges will be extended for five more years, i.e., 20 years,” according to Tanuj Mohanty, Owner of MGM Green Energy.

The state also provides a 25% reduction in wheeling charges for captive and open access green energy consumers.

Chhattisgarh, a state traditionally reliant on coal-based energy sources, has recently witnessed a notable rise in open access solar installations thanks to the state’s waivers on open access charges, which have incentivized commercial and industrial customers to explore solar energy options through open access models.

Industrial consumers are projected to save ₹3.5 ($0.042)/kWh and commercial consumers ₹4.75 ($0.057)/kWh with the charges waived. The state also provides exemptions on charges for all open access models, including third-party arrangements, and allows all open access consumers to bank 100% of their surplus energy annually.

Uttar Pradesh, India’s largest state, is transitioning from a predominantly agricultural economy into a promising industrial hub. The state’s recent industrial initiatives have led to an increase in solar open access demand.

The incentives include a 50% waiver on wheeling and transmission charges for captive and third-party consumers, applicable to open access projects exceeding 1 MW.

Consumers also get a ten-year exemption on electricity duty, with the privilege of 100% energy banking annually. The state has decided to waive stamp duty on land leases or purchases for such projects.

There is also a 50% exemption on wheeling and transmission charges for the intrastate sale of power to a third party or for captive use. Additionally, there is a 100% exemption on the cross-subsidy surcharge, wheeling charges, and transmission charges for intrastate transmission systems when purchasing solar power.

Cutting Emissions an Imperative

According to Ashish Verma, VP – Business Development at Gensol EPC, the shift towards renewable energy has been accelerating in recent years, driven by regulatory requirements and commercial benefits. One key factor is the need for companies to report and manage their carbon emissions.

“Listed Indian companies, particularly the top 1,000 by market cap, must report their sustainability scores, including their Scope 1, 2, and 3 emissions. The RE100 commitment aligns with these reporting requirements, as companies need to demonstrate their progress in reducing emissions and increasing their use of renewable energy,” he said.

Verma said companies not adhering to their sustainability commitments might face negative consequences, such as a decrease in market cap and loss of investor confidence.

Scope 1 emissions are direct emissions from sources owned or controlled by the company, such as on-site power generation or fuel combustion. Renewable energy can directly impact Scope 1 emissions by replacing fossil fuel-based power generation with renewable sources like solar or wind power.

Scope 2 emissions are indirect emissions from the generation of electricity purchased by the company. Switching to renewable energy sources via open access can significantly reduce Scope 2 emissions. This can be achieved by buying electricity from renewable sources or entering into power purchase agreements (PPAs) with developers. By doing so, companies can lower the carbon intensity of their electricity consumption.

Scope 3 encompasses emissions that are not the result of activities from assets owned or controlled by a company, but by those responsible for up and down its value chain.

Renewables Can Improve Bottom Line

Adopting renewable energy and committing to initiatives like RE100 can also yield financial benefits. Companies that meet their sustainability commitments may be able to raise debt at competitive rates through sustainability-linked loans.

According to Verma, procuring electricity via open access is an obvious benefit because the tariff is less than the grid tariff. “The cost savings can significantly improve your profit margins.” This is especially true for industries with high energy consumption, such as steel or cement.

Europe’s Cross-Border Adjustment Mechanism (CBAM) also puts a premium on low carbon intensity in exported products. “For products like steel or textiles, high carbon intensity can lead to additional carbon taxes, making them non-competitive in the market,” Verma said.

He said states must create a favorable ecosystem to facilitate the shift to renewable energy. Infrastructure like land must be made available at attractive prices, particularly in states with high industrial activity but limited resources.

Gyanesh Chaudhary, Chairman and Managing Director, Vikram Solar, said, “Reforms like the Green Open Access Rules has led to a surge in demand from the commercial and industrial sector, driven by ambitious renewable energy goals. ” Open access is one of the bright spots in the country’s solar market, attracting businesses with substantial cost savings.

While the commitment to renewables is beneficial, it comes with challenges, particularly with regional variations in infrastructure and resources. For example, states like Punjab may have high industrial activity but limited land availability for renewable energy projects.

“After years of facing high costs, restrictive policies, and low consumer demand, renewable energy adoption via open access has now reached a point where renewable power is cheaper than grid power. Policies for open access are now supportive, and demand is rising. For corporates, procuring renewable power right now is just good business on so many levels,” commented Raj Prabhu, CEO at Mercom Capital Group.


Get the most relevant India solar and clean energy news.