Source: TATA POWER
Globally, commercial and industrial (C&I) consumers or businesses account for 64% of all electricity consumption. Electricity represents a significant portion of the operating costs of Industrial consumers as well as commercial consumers such as data centres and shopping malls. As a result, such corporate customers are constantly looking for ways to reduce their high electricity bills.
Selection from the various available power procurement options will depend on the
Company’s sustainability strategy, location, overall power consumption and local regulations. The following are some of the options available.
In India, the concept of purchasing electricity from off-site power plants was introduced in 2003, when Section 2 (42) of the Electricity Act, 2003 included “open access”. Since then, a series of regulatory acts and the formulation of the stock market have opened up open-access markets. In line with India's efforts to combat climate change, the Renewable Energy Purchase Obligation (RPO) has been introduced under the National Plan of Action for Climate Change (NAPCC). In it, the mandated entity, DISCOM, and companies that purchase electricity from will provide outside the DISCOM network (through open access to self-installation behind the meter) to minimize renewable energy consumption.
Historically, the corporate market in India has been dominated by coal-fired power plants. However, technological advances are making the renewable energy sector increasingly cost-effective. In addition to cost competitiveness, the move to renewable energy is also being driven by companies' Go Green initiatives and faster installation times. Despite the shift, the open access renewable energy market in India is still in its infancy and the majority of renewable energy installations are still targeted for his PPAs supported by DISCOM. Indian businesses consume more than half of the total electricity generated, so deploying open-access renewable assets is essential to propel the next phase of India's energy transition!
RE100 lists India as the 6th largest market in the world for corporate procurement of Renewable energy. Key obstacles include fragmented policies and the fact that the Regulatory framework differs from state to state across India, and uncertain taxation and taxation related to renewable energy procurement.
In India, the introduction of the open access project will increase the losses of the financially weak DISCOM, as corporate customers are consumers who pay higher for DISCOM.
This inadvertently creates a reluctance to allow fee waivers from DISCOM and to engage in captive and group captive open-access projects that cannot collect CSS. Due to this pressure, there are several examples of various states revising their regulations, even during the period of the treaty.
Installation of capacity in open access has been precarious due to its high reliance on regulation. By FY2017, Madhya Pradesh, Maharashtra, and Rajasthan became leading states for open access projects. However, the business environment has changed with the introduction of the Karnataka Policy, which provides for a 10-year exemption. Andhra Pradesh, Telangana and Tamil Nadu have also introduced favourable policies.
Indian companies dominate the open-access market when it comes to project installations. There are several projects set up by large companies to meet their captive needs. These are, however, only a small segment of the market. Most of the projects launched by Indian companies are based on increasing revenues from accelerated depreciation costs.
Smaller C&I-focused players have been active in the space for a long time, but the Open Access market is dominated by private equity (PE)-backed C&I-focused players and larger beginning to show interest in public utilities. Businesses were concentrated after Karnataka announced his 10-year emancipation. Since then, the market share of both C&I and utility-oriented companies has increased.
Long-term PPAs have only recently appeared on the open access market. However, risk perception for these projects is still significantly higher than for DISCOM PPA-based projects.
Bank participation in the open access market is minimal, in contrast to the utility-scale DISCOM segment, due to high-risk awareness. Private NBFCs hold the largest portfolio of debt financing for open-access projects. In primary insurance, the share of private NBFCs exceeds 60%.
The situation of debt financing in the open access market was similar to that of DISCOM PPA in the evolutionary stage. Entering this segment requires a deep understanding of the market as the regulatory environment is still evolving. The main reason for the overwhelming dominance of private sector-focused NBFCs in the open access segment is their expertise and good oversight framework. As the sector matures, the involvement of banks will increase and the emergence of other financial products will further facilitate leverage in this segment.
To date, the growth of the open-access renewable energy market remains stagnant due to ongoing regulatory uncertainty, DISCOM's deteriorating financial position and reliance on CSS, and changes in banking contract rules. In the future, we expect the following changes: This shows that it is suitable for expanding the market.
The cancellation of bank provisions is a major cause of concern about the feasibility of the project. Declining storage costs, however, are expected to bring about a paradigm shift in the concept of open access projects, resulting in the following differentiations:
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