The key factors driving the transition of commercial and industrial (C&I) customers to renewables include cost considerations, reliable power supply, mandates, and value-driven environmental, social and governance targets. By opting for captive renewables or the open access route instead of grid power, C&I customers can achieve 10-40 per cent savings, depending on the open access charges in different states. Industrialised states such as Gujarat, Maharashtra, Karnataka and Tamil Nadu offer greater savings to open access customers due to their substantial power requirements, grid power costs and well-established open access regulations.
Despite the presence of various drivers in the market, the C&I segment continues to face many challenges. First, there are several regulations that discourage developers from providing open access solutions to multiple customers. These include high open access charges and limitations on contract demand. Second, land acquisition remains a persistent problem as solar projects require large land areas and wind projects necessitate specific sites. Third, the adversarial relationship between distribution companies, C&I developers and customers still persists. Several states like Rajasthan and Madhya Pradesh have started creating roadblocks for ISTS-connected plants by levying several charges.
However, there are many positives in the industry that contribute to a positive future outlook. The extension of ISTS exemptions to renewable energy C&I developers and large consumers has transformed the green open access business. It allows for the concentration of generation capacity to serve a multi-locational pan-India customer base. This makes it easy to set up a large plant in a renewable-rich state that can cater to customers in states with limited renewable resources. Previously, a customer operating in multiple states had to set up separate plants in each location, which was impractical. The availability of a single-entry point with multiple exit points, without the burden of transmission charges, facilitates the concentration of generation capacity in resource-rich states, catering to a pan-India customer footprint.
According to the Ministry of Power’s Electricity (Promoting Renewable Energy Through Green Energy Open Access Rules), 2022, consumers with a contracted demand or sanctioned load of 100 kW or more will now be eligible for green energy open access, a reduction from the previous limit of 1 MW. This policy initiative can significantly increase the size of the open access market. These rules represent a radical policy shift, with the government clearly communicating its intent to make green open access more streamlined. This policy shift is expected to create new business models in the open access space. Going forward, aggregators may emerge to aggregate demands from small players. They will then approach C&I developers to sign power purchase agreements (PPAs) as small players may find it challenging to directly handle such tasks.
While the green open access rules are a huge positive, it is crucial for state regulations to align with these rules in the future. Currently, only a few states such as Punjab, Karnataka and Telangana (which has introduced draft regulations) have taken steps in this direction. Developers also expect uniformity in banking regulations and open access charges across all states.
Moreover, customers are now demanding round-the-clock renewable energy from developers. To meet these specific demands, developers are increasing the capacity of solar-wind hybrid projects and selling the excess electricity generated on the power exchange. This will become a key trend in the future.
Some distribution companies have started offering a green tariff option for customers to meet their climate goals instead of opting for open access. However, this green tariff is often higher than the grid tariff, making it less economically viable for customers. In addition, the green tariff route lacks transparency at present and there is ambiguity regarding the ownership of the green attributes – whether they belong to the customer or the discom.
Going forward, new types of customers are emerging that do not need green power but are interested in purchasing green attributes to offset their carbon footprint. These customers prefer to buy green power from developers with the purpose of selling it in the market while retaining the green attributes. Once legal issues are addressed, virtual PPAs will become a transparent mechanism for calculating green attributes and many plants will adopt this model. n
Based on remarks by Harshal Kalamkar, Director, Business Development, Clean tech Solar, and Vinay Pabba, Chief Operating Officer, Vibrant Energy, at Renewable Watch’s 16th Solar Power in India conference