With the rapidly growing adoption of Renewable Energy in India, there are multiple options for customers when they decide to make the transition to RE. Some customers may initiate the transition by planning for on-site Renewables – typically with a Rooftop Solar plant. However due to various constraints – limited roof space, shading, sub-optimal roof orientation, building ownership/lease and so on, most on-site solutions may only provide a very limited proportion of Renewable Energy penetration to Customers, typically limited to daytime hours. This is why energy-intensive Commercial & Industrial customers are increasingly choosing off-site solutions to meet their entire RE requirements on a Round-The-Clock basis through innovative use of Hybrid Renewable Energy Sources and Storage. In this blog we will be exploring the concept of Open Access – which empowers customers to purchase Renewable Energy from off-site sources.
Open Access, as enshrined in the Electricity Act, 2003 is defined as – “ the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission”. To put it simply, Open Access enables corporates and industries that meet a few minimum criteria, to directly buy power from a source other than their current Distribution Licensee (also known as the Discom). This is typically done through a power producer who builds a renewable power plant on a suitable site and contracts a power purchase agreement (PPA) with the client. This helps the clients to consume energy at competitive prices from off-site renewable energy projects, thus enabling them to make great strides in their commitment towards a green and sustainable future.
Let's dig deeper and understand how it works and how it is classified. Open Access can be divided into the following categories depending on where the power producer and client are located:
Intra-State Open Access: Both buying and selling entities are located in the same state, and the Project Site and Consumption Site are usually within the same state boundaries. It adheres to rules established by each of the State Electricity Regulatory Commissions (SERC). It can also be divided into three categories: short term, medium term, and long term. The duration of these terms ranges according to the regulations in each state. Intrastate solutions are a good option for customers who have large, energy-intensive facilities located in states that are also rich in Renewable Energy sources.
Typically the project developer quotes a Busbar(or base) Tariff, in addition, certain charges and losses need to be paid to the Distribution Utility that owns the infrastructure that is being used to transfer the generated power.
These include Wheeling, Transmission Charges & Losses, as well as Cross Subsidy and Additional Surcharges (depending on if the transaction is carried out under Group Captive or Third Party mode, explained further later).
Inter-State Open Access: Under this mode of Open Access, the Generation Site (Injection or Delivery Point) and Consumption Site (Drawal Point) are typically located in different states. The Inter State Transmission System (ISTS) is utilised in this case to wheel the generated power to each of the customer facilities and they are both required to abide by CERC (Central Electricity Regulatory Commission) rules as published from time to time.
The purchase rights under inter-state open access can be for Short Term (< 1 month), Medium Term (3 months- 3 years) and Long Term (12-25 years). The key advantage of the projects built on the ISTS is that they allow the generated power to be utilised by customers who have distributed facilities on a pan-India basis. In addition the project sites selected by the developer are typically optimized to provide the highest possible generation, that may not be possible in the states where the customer facilities are located.
Under Inter-State Open Access mode, there will be Charges and Losses that need to be borne both at the Interconnection Point (POC Charges) in addition to those at the State Level. However it is important to note that, projects being commissioned on or before June 30 2025 have been granted a waiver on the POC Charges as notified by the Ministry of Power, making it an extremely attractive option for Customers.
The mode of sale under the Open Access mechanism can also further be differentiated into Group Captive and Third Party mode, based on if the customer chooses to invest some of the project costs as equity in the project. It is important to note that Customers can choose to procure power on an Intra or Inter- State basis in either of these modes.
Third-Party Mode:
Under Third Party mode of Open Access, the customer does not invest any equity into the project. The entire cost of the project is borne and financed by the Project Developer. While this may seem to be an advantageous way to procure Renewable Energy (as the customer does not have any expenditure up front), it is important to note that projects that operate under this mechanism are subject to Cross Subsidy and Additional Surcharges in addition to the base tariff, Open Access Charges and Losses. In some states these charges are so high that the landed costs to the customer often exceeds their present electricity tariff! To avoid these charges and to improve the economic viability of the project, the Group Captive mode is typically utilised.
Group Captive Mode –
In the Group Captive Mode, a customer invests a specified proportion of the project cost as equity up front and will consume a minimum threshold of the energy generated from the project, thereby saving on the Cross Subsidy and Additional Surcharges. The savings provided by this model is sufficiently high that typically the equity is returned to the customer in a period < 12 months. A brief overview summarizing the Group Captive model is provided below:
What are the savings one can expect by going with Open Access solutions?
Below we show a typical working of the savings that customers can expect, including the breakup of charges, and losses along with the base PPA tariff vis-à-vis the Grid Tariff that the customer is paying currently.
Vibrant Energy is a leading owner & developer of Open Access renewable energy solutions dedicated to corporate and industrial consumers, with an exclusive focus on off-site solutions. Vibrant empowers C&I consumers to achieve their 100% renewables targets by deploying easy-to-adopt (OpEx) solutions for energy consumption from Offsite (Wind and solar) farms. Headquartered in Singapore and Hyderabad, Vibrant has over 1,117 MWs of Assets Under Management (AUM), including under-construction assets. Venturing in various sectors like FMCG, Pharmaceuticals, Data Centers, Beverages, Steel, OEMs and much more- Vibrant has helped many clients transform their businesses towards sustainability.
While this may sound technical and has many consumers worried about things like regulatory risk, supply chain management, operations and maintenance, ESG, etc, Vibrant Energy makes this transition successful and hassle-free with their unique pay-as-you-go models ranging from Group Captive, Cash Neutral Group Captive, Virtual PPAs and Deferred EPC – we ensure that we provide tailor-made solutions for each of our customer’s requirements.
Coming to the most crucial part of this solution, why should one go for it? What are the benefits it offers? Firstly, it is cost-effective as it helps reduce costs and delivers recurring commercial savings of over 25% per unit of electricity – this empowers businesses to improve their bottom line and become more profitable. Additionally, Vibrant Energy provides complete assistance to build, own, and maintain the power plant which means that the consumer does not need to have any in-house technical capability to make this transition.
A strong on-the-ground execution team and an extensive industry experience in renewable energy is what makes Vibrant Energy the #1 choice for Open Access solutions for solar and wind across India.
If you would like to learn more about how your organization can make a successful transition to Renewable Energy, do write to us at LinkedIn, Facebook, Instagram, and Youtube.