• April 15, 2024
  • Category

Open Access in Solar PV power sector

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.

  • Distribution Company (DISCOM) – This is the most traditional and widely used method. DISCOM acts as an intermediary between producers and consumers. DISCOM is a supplier of last resort due to its extensive support for its regulations in the region. However, tariffs may not be very competitive.
  • Open Access – Consumers can obtain power from their power plants outside using DISCOM's transmission and distribution infrastructure. As a result of this model, DISCOM's infrastructure is accessible to all groups without discrimination. However, its use is subject to fees and prescriptions. This model has two subsegments.
  1. Wholesale Market – Operated through a marketplace platform that brings together multiple buyers and sellers to buy and sell power at market prices based on supply and demand. However, the arrangements in this market are predominantly for a short-term duration only.
  2. Bilateral Market – As opposed to the wholesale market, the buyer and seller can enter into a mid-term to a long-term contract on a mutually agreed basis
  • Behind The Meter options – Rooftop solar and large coal or diesel-based captive plants are the most commonly used behind the meter options. Under this, corporates can consume the produced electricity at the point of generation, thus minimizing any Transmission or Distribution (T&D) losses.

 

Company’s sustainability strategy, location, overall power consumption and local regulations

Open Access Market in India

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. 

Open Access Market in India

Open Access Market in India

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!

The regulatory framework for OPEN ACCESS in India by states

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.

Open Access Market in India

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.

Competition scenario

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.

 Competition scenario

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.

Risk Assessment

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.

Risk Assessment

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: 

  • Wind-solar hybrid systems have high grid utilization, but if both solar and wind systems are generating at the same time, the power Throttling occurs
  • Declining storage costs could address this issue
  • Creation of spinning reserves from auxiliary services or private generators is another market being developed in India. 
  • CERC issued a draft of the Ancillary Services Regulations in June 2021 for better frequency control, voltage and reactive power support, and maintenance of generation and transmission reserves. Once this market goes live, the will provide another revenue stream for memory-based projects.
How Waaree can help?

Waaree Energies Ltd. is the flagship company of Waaree Group, founded in 1989 with headquarters in Mumbai, India. It has India's largest Solar panel manufacturing capacity of 5GWs at its plants in Surat and Umbergaon in Gujarat. Waaree Energies is amongst the top players in India in Solar Panel Manufacturing, EPC Services, Project Development, Rooftop Solutions, and Solar Water Pumps and is also an Independent Power Producer. Waaree has its presence in over 380 locations nationally and 20 countries internationally. Step on to your cleaner journey by contacting us at 18002121321 or mail us at waaree@waaree.com

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