High Tariffs in Maharashtra Drive Open Access Solar Adoption
The state is second in terms of cumulative installed solar open access capacity
Higher retail tariffs in Maharashtra have spurred commercial and industrial (C&I) consumers to opt for solar open access, helping them save up to 40% on electricity bills annually.
According to Mercom India’s Q1 2023 Mercom India Solar Open Access Market Report, as of March 2023, the state had the country’s second-largest cumulative installed solar open access capacity of 1,037 MW, accounting for 12.5% of the total capacity.
During the first quarter of 2023, the state added 70 MW of solar open access capacity, up 6% quarter-over-quarter compared to about 66 MW in Q4 2022.
Metallurgical industries, information technology, and pharmaceutical companies were the state’s largest adopters of solar open access during Q1 2023. With a pipeline of 519 MW, Maharashtra is all set to witness more capacity additions in the following quarters.
Here are some important points to consider for C&I consumers in Maharashtra intending to go for solar open access.
Electricity Cost Savings
A significant factor facilitating the growth of open access in the state is the high retail tariff, which is among the highest in the country. C&I customers have shifted to the solar open access model to take advantage of lower energy costs and save on operating expenditure.
In April, the Maharashtra Electricity Regulatory Commission approved raising the tariff for C&I consumers for the current financial year (FY 2024).
On average, C&I customers in Maharashtra can save up to 30-40% on their electricity bills by opting for solar open access under a captive or group captive model.
According to Aditya Malpani, Regional Head-West, and Director, Open Access at Ampin Energy Transition, “The approximate savings for industrial customers is around ₹2 (~$0.024)/kWh, whereas, for commercial consumers, it is around ₹6 (~$0.073)/kWh under the captive or group captive model.”
Concurring with him, another leading open access developer said that a C&I consumer in Maharashtra could easily save anywhere between ₹4.5 million (~$54,482)/MW and ₹5 million (~$60,535)/MW per year by opting for solar open access.
The table below shows savings for open access consumers in Maharashtra under the captive or group captive model.
The net landed cost for a captive or group captive project in Maharashtra is around ₹6.56 (~$0.080)/kWh.
Considering this, the savings for industrial customers come to around ₹1.56 (~$0.019)/kWh and around ₹6.27 (~$0.077)/kWh for a commercial unit.
Notably, the cross-subsidy surcharge is exempted for projects under the captive or group captive models, whereas the additional surcharge is ₹1.36 (~$0.017)/kWh.
Third-Party for Open Access
The third-party model is not a viable option for C&I consumers in Maharashtra due to the cross-subsidy surcharge, additional surcharge, and other fees.
The net landed cost for C&I consumers under the third-party model comes to ~₹8.25 (~$0.10)/kWh.
Under the third-party model, commercial and industrial customers must pay ₹1.69 (~$0.021)/kWh as a cross-subsidy surcharge. They must also pay wheeling and state transmission charges, making it an unviable option.
C&I consumers are also charged ₹1.36 (~$0.017)/kWh as an additional surcharge, rendering the model unfeasible for most.
While there are no benefits for industrial consumers under the third-party model, commercial consumers can still save ₹4.58 (~$0.056)/kWh under the model.
Return on Investment
Considering the savings and 26% equity share in captive and group captive projects, the return-on-investment period is very short, ranging from 8-12 months.
“An industrial consumer in Maharashtra can expect the return on investment within 10-12 months, considering the rates and the initial capital investment. On the other hand, a commercial consumer can expect to make the money back within 7-8 months,” the open access developer said.
Power Purchase Agreements
In addition to the savings, industrial and commercial consumers should look into various other factors, such as understanding the basic open access charges, banking mechanisms, and guaranteed energy settlement.
“Choosing the right green open access partner is a crucial decision for open access consumers which can significantly impact their projects’ success and long-term viability. Evaluating factors such as reliability, capacity, sustainability, pricing, contractual terms, technical expertise, and reputation is crucial. The developer should have strong financial backing to support their projects,” Malpani said.
“Contractual terms and policies, including contract duration, exit clauses, price escalation clauses, and provisions for flexibility in energy procurement, should be reviewed before signing the power purchase agreement (PPA). By examining these aspects, consumers can mitigate risks and ensure long-term stability in energy supply,” he added.
Compared to variable retail tariffs, consumers can benefit from long-term open access where the tariff remains the same for the entire period. This makes long-term open access (LTOA) an attractive alternative for C&I consumers.
The chart below shows the year-over-year growth in the retail grid tariff as compared to the fixed PPA prices for open access solar.
The growth of open access in Maharashtra can also be attributed to the state’s supportive regulatory framework and efficient approvals by DISCOMs.
The state’s multi-year tariff gives stakeholders a long-term trajectory of open-access charges and assurance regarding their savings throughout the tariff order’s validity.
“Maharashtra has a significant C&I market and one of the country’s highest retail tariffs, making green open access a popular source among these consumers. It has ample land and readily available transmission infrastructure to set up open access projects in the state. The state regulators have implemented energy settlement on a monthly basis with a banking charge of 2%. Also, it has a multi-year tariff framework allowing developers to make informed decisions on project planning and execution over the long term. Further, as per the Maharashtra State Energy Policy, there is an electricity duty waiver for renewable energy projects set up under a captive model until 2027,” Malpani noted.
“Coupled with timely permission for grant of open access, Maharashtra provides a conducive market for bulk energy consumers to meet green energy requirements and seamless growth for renewable energy developers looking to enter the C&I market,” he said.
Mercom India will host the C&I Clean Energy Meet in Chennai on July 21 to bring together industry experts and C&I consumers looking to save power costs to discuss various energy transition options.
Interested entities can register for upcoming events by sending an email to firstname.lastname@example.org.
To find out more about the upcoming events, click here.