The total installed solar capacity in the open access market has reached 3.6 GW as of December 2019 and the pipeline of projects under development and in pre-construction phase is estimated to be approximately 1.5 GW, according to the newly released report, The Open Access Solar Market in India – Key States, by Mercom India Research.
The open access solar market in India has been offering parallel opportunities for stakeholders, including large corporates, solar project developers, investors, and power distribution companies to participate in the solar growth story and meet renewable power obligations.
Based on cumulative installations as of December 31, 2019, Karnataka was the largest market for open access, followed by Andhra Pradesh, Maharashtra, Uttar Pradesh, Telangana, and Haryana.
According to the report, Karnataka was a very attractive state for open access projects through 2018, but now the state is more restrictive.
Uttar Pradesh, Haryana, Tamil Nadu, Maharashtra, and Andhra Pradesh have favorable policies for captive and group captive projects. The average open access tariff in these states range from ₹3.50-5.00 ($0.047- 0.068)/kWh with a yearly escalation of 1-2% depending on contract terms.
However, just because a state’s policy looks attractive on paper, it does not necessarily translate to success on the ground. According to the report findings, approvals are tough to get and government agencies are making it hard to get open access projects implemented.
For larger power consumers of over 1 MW, open access solar provides an attractive option of selecting their power suppliers, accessing quality power, reducing power costs, and going green.
The open access market in India is primarily made up of third-party sales and captive power generation. But due to a slew of charges and regulations, third-party sale projects have come to a standstill. The other option is captive power generation, where a single entity sources the power. The same captive power sourced by a group of companies is known as group captive projects.
Power purchase agreements (PPA) under the group captive model are largely for 15-20 year terms. Long-term open access PPAs are preferred by developers, while a lot of consumers favor short-term contracts. Short-term PPAs witnessed an increase over the past decade of 6% to 12% from financial year (FY) 2009 to FY 2019. Short-term contracts range from one month to one year.
Transmission and wheeling charges and additional cross-subsidy charges payable by open access consumers in top states hover around ₹2.32-3.79 ($0.031- 0.051)/kWh. These charges are in addition to the open access tariffs in the states.
There are plenty of multinational companies that are choosing group captive solar to go green but have strict norms to ensure the counterparty or the open access developer is financially sound and will stay invested for the long-term. This has brought in demand for serious players to develop projects to sell power to these companies.
Open access makes sense for an industry with high, round the clock power demand as their consumption can be off-set by cheaper renewable power. Industries like steel manufacturing, mining, refineries, cement manufacturing, chemical manufacturing, which operate round the clock, have a huge requirement of power, so they always opt for cheaper power irrespective of the sources.
“A sizeable investment can be unlocked from large corporates and multinationals who are ready and willing to invest in open access projects to meet their renewable obligations. Instead of encouraging and working towards the country’s goal of 100 GW of solar by 2022, states have erected hurdles at every step,” commented Raj Prabhu, CEO of Mercom Capital Group. “A serious push from the center to get states to reduce regulatory hurdles is needed for the open access market to take off again.”
Rays Power Experts, CleanMax Solar, and Amplus were the top open access developers as of 1H 2019. ReNew Power and Avaada Energy are other developers in the top five position according to Mercom’s India Solar Market Leaderboard 1H 2019.
Mercom’s “The Open Access Solar Market in India – Key States” report is 56 pages and covers vital information and data on the market. For the complete report, visit: https://mercomindia.com/product/open-access-solar-market-india-key-states