Vineet Mittal on Open Access Solar in Energetica India 2022

With rapidly growing awareness and adoption of solar power in India, there are multiple terms that people come across. At Navitas Solar, one of the leading solar module manufacturers in the nation, we always strive to educate our customers and help them make informed decisions.

Let’s dive deeper into one of the buzzwords of solar power – Open Access solar power.

To put it simply, Open Access solar power is an arrangement in which a power producer builds a solar power plant on a suitable site and contracts a medium/long-term power purchase agreement (PPA) with a consumer.

If you are a business that uses solar energy, there are two options for generating solar energy: (1) Solar power plant on-site (which might be on a rooftop, ground mount or carport solar installation), and, (2) Open Access solar power (wherein consumption of solar power is managed through the grid).

It is interesting to know how Open Access solar power works. Usually, a state develops solar farms to generate solar power, typically in a rural area where land is freely available, and then the generated solar power is fed into the state’s electricity grid. From there, the energy will then be distributed to large users in the state using the existing grid infrastructure. Any commercial establishment like a factory, a hospital, a five-star hotel, an IT park, or anyone with a minimum contract requirement of 1000 kVA might be the power consumption.

Open Access is classified broadly into two categories. It mainly depends on the location of the consumer and producer:

• Intra-State Open Access: In this case, both the customer and the electricity producer are from the same state and must abide by the rules of the State Electricity Regulatory Commission (SERC). Intra-State Open Access Arrangement, where both the power-producing solar farm and the consumer are in the same state, has been a notable element of open access in solar. These intra-state agreements take use of various state governments’ exceptions and waivers, resulting in enhanced cost savings for the consumer. As a result, the net landed price to the consumer is lower than the price of power obtained from traditional power sources.
• Inter-State Open Access: In this case, the customer and electricity producer both are from separate states and must adhere to central laws specific to this situation

In the Open Access solar power, a Solar Power Purchase Agreement (PPA) is signed between the consumer and the power producer. It is the main governing contract for solar power through open access and it is done usually for a long term (10 years or more). For the duration of the PPA, the power producer agrees to supply a certain number of units every year at a certain tariff. Taxes and open-access fees are levied under state regulations.

Open Access allows large power customers with more than 1 MW of linked load to acquire power directly from power suppliers at a lower price (open market). Traditional consumers, on the other hand, have no choice but to use the AREA DISCOM for electricity and have no control over the tariff. The Electricity Act of 2003 allowed consumers with more than 1 MW of sanctioned load to purchase electricity directly from power providers, pay certain tariffs and taxes, and lower their power costs.

Today, India has a large network of private offsite open access renewable energy farms across India, through which they supply large corporates clean energy as per their requirements.

There are 3 models of Open Access to procure low cost renewable energy:

1. Captive Open Access: In the captive capex model, the corporate buyer makes the 100% upfront capital investment. The buyer owns the power generating asset and the solar generated power is used for the buyer’s consumption. Renewable developer constructs the plant, operates and maintains it over its lifetime. Key benefits are Hedge against electricity charges, tax benefits and No technical experience needed from a consumer’s end. In this model, Open Access charges from the grid are applicable, but charges such as cross-subsidy surcharge and additional surcharge are waived off.
2. Group captive Open Access: Group captive model is a variant of captive model. Under this model, a project is developed for collective use of one or many corporate buyers. In this model, buyer(s) hold(s) 26% equity whereas investor bears 74% of the investment. Key benefits are minimum investment and risk, savings on electricity and No technical experience needed from a consumer’s end. In this model also, Open Access charges from the grid are applicable, but charges such as cross-subsidy surcharge and additional surcharge are waived off.
3. Third party Open Access: Most of the businesses today strive energy from green sources. Rooftop or ground mount solar being the best ways to start but many corporates don’t have sufficient spaces. Under this model, green power can be purchased though open access. Moreover, this model allows consumers to overcome the limitations of onsite solar installation, as it is a scalable option which is not constrained by availability of space at the consumer’s facility. With open access power,consumers can begin to access affordable clean energy from day one. For corporate businesses, open access power helps in regular supply at lower tariff with reducing their carbon footorint. Key benefits of this model are zero upfront investment, guaranteed savings on electricity cost, a risk-free solution and tariff certainty for next 20-25 years because of PPA. Cross-subsidy surcharge and additional surcharges are not waived off in this model.

There are three types of Open Access in terms of duration. The period for Short Term Open Access (STOA) is from 3 months to three years. Medium Term Open Access(MTOA) period is from 3 years to 12 years whereas Long Term Open Access(LTOA) period lies from 12 years to 25 years.

The government of India has recently notified the green energy open access. The Electricity (Promoting Renewable Energy Through Green Energy Open Access(GEOA)) Rules, 2022 are explained below:

• As mentioned earlier, Open access was introduced by the Electricity Act, 2003 to promote competition in the market by providing a choice of suppliers to the consumers and the act enabled large power consumers having connected load > 1 MW to buy cost effective power from power purchasers. According to the new rules, the consumers having a load >100 kW can directly purchase electricity through Reenable Power Producers(RPP) rather than only depending on DISCOMs.
• The Rules also introduce the concept of a Uniform Penewable Purchase Obligation(RPO) on all obligated entities in area of a distribution licensee. The mechanism for determination of the uniform RPOs is will be provided.
• Any consumer can opt to purchase renewable power by– Own Generation from RE sources- Open Access from directly Developers/ via trading licensee/via power markets

  – By requisition from DISCOMs

  – By consuming green energy from captive power plant

  – By purchasing of REC(Renewable Energy Certificates)

  – By purchasing green hydrogen

• A central nodal agency (CNA) will be established to act as a single window clearance system for processing green energy open access applications and the window for approval will be 15 days after submission. The CNA is supposed to prepare a common application format for the Green Energy Open Access within a period of 60 days of commencement of these rules.
• There have been hindrances on the banking of green power by the Discoms, it has now been mandated that DISCOMs will provide the banking of green power. In order to boost the green hydrogen, the GOI has provided additional benefits in terms of removing the open access charges if the green energy is used to generate hydrogen.
• Discoms generally charge about Rs. 2-4/kWh as cross-subsidy charge, additional surcharge, and standby charges. There is a cap now by MoP on these charges and there is no additional surcharge on the green power open access. There is going to be more transparency on these open access charges by the DISCOMs.
• The concept of Green Certificates and Green Ratings have been introduced to incentivise adoption by facilitating transparency in ESG disclosures. DISCOMs will issue green certificates to such consumers purchasing green power above RPO limits. State government may introduce concept of rating or labelling for such consumers too based on percentage of green power purchase.

Overall, this looks as a promising step to encourage RE. When it comes to choose the best option, there are many other things to consider. Navitas Solar can help you decode all those factors and go confidently with solar power.