Group Captive is the Most Preferred Open Access Mode for C&I Customers: Interview

The demand for RTC power is growing, with hybrid power projects being the best available option


The group captive model is the most preferred model by the commercial and industrial (C&I) segment as it allows them to not only use green energy but also save 30-50% on energy bills, Pankaj Verma-Head of Business Development at SunSource Energy, said on the sidelines of the Mercom India Renewables Summit 2023.

Verma added that companies opt for hybrid power projects offering round-the-clock power with a capacity utilization factor of up to 50%.

Below are excerpts from the interview.

What is your current operational capacity?

Initially, SunSource was primarily a rooftop-focused business. Three years ago, we entered the open-access segment. Our portfolio, including commercial and industrial (C&I), is 400 MW, and we plan to commission another 300 MW by March 2024.

Most of the development is happening in Karnataka (100 MW). We are also developing 90 MW of projects in Uttar Pradesh and another 25 MW in Tamil Nadu.

What are the reasons behind the surge in demand for round-the-clock (RTC) power?

If you go with vanilla solar or wind projects, the maximum capacity utilization factor (CUF) you can achieve is 20% and 30%, respectively. However, you can achieve a CUF of 40-50% with a hybrid power project.

Beyond that, one has to go for battery storage. With companies going for carbon neutrality, replacing energy from conventional sources with 100% green energy is necessary.

If someone decides to go 100% carbon neutral, they would require both solar and wind. Since most states don’t allow energy settlement during peak hours, I see real-time settlement gaining prominence shortly.

Currently, hybrid power is the best available option. After Gujarat, Karnataka is also planning to develop a hybrid power policy.

Can you name the top three states for C&I customers procuring power from open access?   

Karnataka has to be at the top. Earlier, it had annual banking, which is now monthly. With the oversizing of the project every year, you could replace 100% of the power annually. It will change with monthly banking, but still, it is one of the best states with oversizing.

The second has to be Tamil Nadu, which also has provisions for monthly banking, and the project size is unlimited.

Then we have Maharashtra and Gujarat, which are at par. Some of the other states that are opening up are Andhra Pradesh, Telangana, Odisha, and Madhya Pradesh.

Out of the captive, group captive, and third-party models, which is the one that is attracting the most attention?

The unique value proposition is the captive/group captive model. Here, you are procuring green energy and saving almost 30-50%, depending on which state you are in.

But some large MNCs are not free to invest money into equity and are forced to procure power under the third-party model. Under the third-party model, the commercial savings are lower than in the captive/group captive model.

Is various charges imposed by distribution companies (DISCOMs) affecting the wider adoption of third-party open access?  

In Maharashtra, the landed cost of power from the distribution company (DISCOM) is around ₹8.5 (~$0.103)/kWh. Even with the third-party model, you would save nearly ₹1 (~$0.012)/kWh-₹1.5 (~$0.018)/kWh.

In Maharashtra, the third-party model would make sense, but in other states, the power tariffs range from ₹7 (~$0.085)/kWh-₹7.5 (~$0.091/kWh and a consumer can save up to ₹2 (~$0.024)/kWh under the group captive model.

The group captive model would make sense in states like Punjab, Odisha, and Chhattisgarh, where the landed cost comes to ₹5 (~$0.061)/kWh. In these states, the third-party model is not a viable option.

What would be the investment, and how long would it take for a customer to recover the costs for a 1 MW captive or group captive project?   

For a 1 MW project, the equity investment for a customer is ₹4 million (~$48,548). The number of units generated is around 1.5 million.

Given the number of units generated, a consumer can save up to ₹2 (~$0.024)/kWh-₹2.5 (~$0.031)/kWh.

So, the total savings comes to about ₹4 million (~$48,548) for a 1 MW project.

In nearly one year, they can recover their equity. Customers making equity investments can get back their equity during the first year.

Are your customers adopting green energy because they know that not doing so may affect their business prospects, if not now, then soon in the future?

We have a mix of customers. Some Indian customers understand the value of going green and are committed to their energy transition targets.

Also, we have customers who have business requirements. We are supplying power to one of the largest bottlers for Pepsi and Coke. Companies like Pepsi and Coke are committed to having 100% green energy in their plants. For business requirements, they need green energy, or their business is in danger.

How will waiving the interstate transmission system (ISTS) charges affect the C&I business?

The ISTS waiver keeps the equation the same. The government has waived the ISTS transmission charges, but when one enters a state, he has to pay the cross-subsidy surcharge, additional surcharge, and all the other charges.

The waiver of ISTS charges is going to help consumers who are multi-locational. For example, a consumer’s requirement is 100 MW, and they sign a power purchase agreement (PPA) with the developer, and the developer supplies power to all the plants across the states. The benefit is that the power can be supplied in states that do not favor open access. The only approval required is a no-objection certificate from the states.

The Approved List of Models and Manufacturers (ALMM) has been kept in abeyance for a year. How will it affect the developers, given that projects with imported modules must be commissioned by March 31, 2024?

In the short term, we plan to commission 300 MW of projects by March 2024, for which the procurement has already started.

For the future, planning needs to be done. We can’t import 400 MW-500 MW of modules and keep them in store for future projects. That is not a viable option. As soon as the ALMM announcement was made, the module prices came down to $0.21 (~$0.002)/Wp.

The developers got few benefits even when the ALMM regulation was in place. The domestic modules were only 5-7% cheaper than the Chinese modules. Also, the tariffs have come down by about ₹0.25 (~$0.003)/kWh from what it was nearly six months ago.

What would SunSource do differently after being acquired by a Netherlands-based company last year?

SHV Holdings is a Netherlands-based company in India as SHV Energy. The name of the brand in India is Supergas. SunSource was acquired in November last year, and now we are a part of SHV Energy.

The acquisition has given us access to capital, which makes us competitive, and we also have aggressive plans for the future.

We are expanding across five to six states, and by 2026, we intend to be a GW company in the C&I segment.