Time for Open Access Solar is Now for C&I Segment in the Wake of Coal Crisis
Stakeholders believe DISCOMs are the biggest obstacles to fostering the growth of open access
The power crisis triggered by depleting coal stocks in thermal plants appears to have eased to some extent, but it has provided a wake-up call to the Indian industrial sector.
The upside of the energy crisis in the last few weeks is that it emphasized the opportunity for the C&I segment to seriously consider meeting more of their power needs from the more economical renewable sources to avoid such situations in the future.
Open access solar and other renewable projects could come as a relief for C&I consumers amidst crises like the one spurred by coal shortage.
‘India’s solar open access installations totaled 209 MW in the second quarter (Q2) of 2021, a 664% year-over-year (YoY) increase compared to 27 MW in the same period last year, according to Mercom’s India Solar Open Access Market Report Q2 2021.
Several corporations and industries have pledged to reduce their carbon footprint and achieve net-zero emissions in the next few decades. Climate change and the pressure to fulfill renewable purchase obligations will only create more demand for renewables, especially solar.
Dwelling on the state of open access projects in the country, Aditya Malpani, Director, Open Access at Amp Energy, said, “I believe that the coal shortage will significantly impact the renewable sector (since solar projects have less gestation period than thermal). While there have been significant efforts by the central government to promote renewables, we have seen a muted response from the nodal agencies in the states, who have not been able to sell electricity at ₹2.40 (~$0.032)/kWh-₹2.50 (~$0.033)/kWh. Open access and distributed projects have met with significant resistance. With a significant increase in peak demand and an all-time high spot electricity prices in the exchange, we will see the DISCOMs being more forthcoming in executing power sale agreements and also promoting renewable open access projects.”
“I believe that the all-time high spot prices and volatility in spot prices will lead to expedited reforms in the power markets. With the Supreme Court ruling for the settlement between the Central Electricity Regulatory Commission (CERC) and SEBI, stakeholders are likely to launch financial derivatives and innovative physical delivery contracts. This will pave the way for a vibrant electricity market to give the C&I consumers multiple options for power cost mitigation,” Malpani said.
Shedding light on the plight of the C&I segment, an executive from a leading open access developer said, “The procurement of renewable power from open access is definitely going to be a viable alternative for the C&I segment now and in the near future. It is not just because of the current coal crisis. Even in the long run, it is going to be a good alternative. If C&I consumers procure power from renewable sources, it will help them save money and diversify their portfolio. They will not depend on thermal power alone.”
“Considering the various business models, the third-party business model will be a more preferred option for the C&I segment for the short term. From a long-term perspective, captive or group captive will be more suitable. If the coal shortage continues for long, and the industries carry on with their production process, the cost of energy for the C&I segment will increase. It is just the right time for C&I consumers to think about diversifying their portfolio. They should try to procure power through open access equivalent to their baseload consumption,” the executive said.
Renewable open access an economically viable alternative
C&I entities are trying to meet a significant portion of their power demand through renewable sources with global commitments like RE100, Science-Based Targets initiative (SBTi), and environmental, social, and governance. Lack of sufficient roof space to meet a more significant percentage of power demand has led many corporates to opt for open access.
Sharad Pungalia, Chief Commercial Officer at Amplus Solar, said, “The increase in capital costs and the delay in deliveries could impact the projects under development. With the increase in the cost of conventional energy sources, renewable power procurement through open access provides a good alternative for the C&I segment. It gives them a cheap and economically feasible alternative, especially with the coal crisis looming large. However, the industry requires support from the utilities to facilitate such projects. In recent times, there have been mixed regulatory developments in various states, causing a delay in the adoption of renewable open access by the C&I segment. This has to go.”
State-owned DISCOMs are the biggest impediment in fostering the growth of open access in the country as they fear losing their high-paying C&I consumers. The DISCOMs are reluctant to provide their transmission and distribution infrastructure for the supply of power to third-party and captive users.
Stressing the economic viability of open access for C&I consumers in the wake of the coal crisis, Gaurav Siani, Assistant Manager at Hero Future Energies, opined, “If the C&I consumers opt to procure power from the exchange, it’s going to be costly. The situation is bad right now, and everyone is planning something to get their plants running if there is a power shortage. The situation is the same in China, and industries are affected now. The industries in India will also be affected, but to what extent remains to be seen. Renewable open access is a viable alternative, and it can act as a buffer for the C&I segment in these challenging times. Some companies have diesel generator sets for their operation, but that will again affect the cost. You cannot plan for this kind of event.”
“Thermal plants across the country have stocks only for a few weeks, and the increase in international coal prices has also affected coal procurement. The C&I consumers can either buy the power from power exchanges or through open access. Short-term open access is not a preferred trend as of now, but it can definitely be a feasible alternative to fight the coal crisis. The situation is bad, and the impact cannot be assessed now,” Saini said.
Need to integrate coal with renewables
Many say that the crisis was in the making. But the situation has presented the government with an opportunity to move away from fossil fuels towards a clean economy.
Speaking on the need to integrate renewable energy with conventional forms of energy, Vinay Pabba, CEO and Founder of VARP Power, said, “More renewable energy in the grid would definitely reduce our dependency on coal and move the economy away from fossil fuels. The current portion of renewable energy in the grid (in kWh) is much too small, despite crossing 100 MW of installed nameplate capacity. It will make a meaningful difference in the nameplate capacity if it crosses the 60-70% level and 30% in generation terms. This higher penetration can come from utility purchases, green open access, and decentralized solar for C&I and residential. In fact, it needs to happen with all three. We cannot depend only on open access and solar rooftops for the C&I segment to drive this substitution. They are a drop in the ocean today, in the overall capacity basket.”
“Our hope for a meaningful substitution of coal and reduced dependency thereon, in the near future, continues to be from large grid-connected, utility-scale solar and wind plants with or without batteries or some form of energy storage,” Pabba added.
The demand for open access has been rising, and with the growing concerns about climate change, many corporations and industries are moving towards renewable open access. While the coal crisis has opened up new challenges, it is also an opportunity for the C&I segment to look at renewable power procurement through open access.
Giving greater prominence to green open access will drive the C&I segment to set up their own captive power projects, which will be a much better option for the industrial consumers than their dependence on conventional energy sources.
To address the various issues related to the Indian Solar Industry, Mercom hosted a virtual conference, ‘Mercom India Solar Forum 2021‘ on October 21. The virtual event addressed the ground realities and market outlook amid the rapidly changing solar space.
A session dedicated to the growing demand for open access among C&I customers, titled ‘Open Access Solar – an Ideal Solution to Reduce Carbon Footprint and Operating Costs for C&I Entities,’ examined new ideas and suggestions to make open access favorable for all. Click Here to view a recording of this panel discussion.