Tata Cleantech Report On The Indian Renewable Open Access Landscape

A joint venture between Tata Capital Limited and International Finance Corporation (World Bank Group), Tata Cleantech Capital Ltd (TCCL), has made a report on the market trends and state comparatives of Indian Renewable Open Access. 

Globally, commercial and industrial (C&I) consumers, or corporates, account for 64% of the total electricity consumption. Under open access electricity procurement, consumers can procure electricity from an off-site generating plant by using the transmission and distribution infrastructure of the DISCOMs. Under this model, DISCOM provides non-discriminatory access to its infrastructure. However, the use is subject to charges and regulations. This model has two sub-segments:

• Wholesale market – It operates through a market platform where multiple buyers and sellers come together to buy and sell electricity at market-determined prices based upon demand and supply. However, the arrangements under this market are predominantly for a short-term duration only.
•  Bilateral Market – As opposed to the wholesale market, the buyer and seller can enter into a mid-term to long-term contract on a mutually agreed basis.

According to the report, the corporate PPA (Power Purchase Agreement) market is more matured in the US and in the European countries, globally.

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Indian Open Access Market 

Since 2003, a series of regulatory orders and formulation of the exchange market has opened up the Open Access market in India. In line with India’s commitment towards fighting climate change, Renewable Purchase Obligation (RPO) was introduced under National Action Plan for Climate Change (NAPCC). Under this, the obligated entities, DISCOMs, and corporates procuring power from outside the DISCOM’s network were mandated to ensure minimum renewable consumption. In 2021, GTAM (Green Term Ahead Market) and RTM (Real time Market) markets were introduced for renewables in India. 

The report showed that the Nascent Open Access market in India had 86% of utility-scale DISCOM PPAs, 9% of off-site open access, and 5% of on-site solar projects as of December 2020. 

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While the power supply arrangements were distributed in 52% of IPP (independent power producers) and state generators, 37% of Central Agencies, 5% of Exchange, 4% of Over The Counter (OTC), and 2% of Balancing or Deviation Settlement arrangements. 

Despite the shift towards renewable power, the Open Access renewable market is still in a nascent stage in India as the bulk of the renewable energy installation still caters to the DISCOM backed PPAs. Since India’s corporate consumes over half of the total electricity generated, the adoption of renewable Open Access plants would be crucial for driving the next level of India’s energy transition, says the report. 

Recently, it has been noticed that with rapid technological advancement and falling tariffs, the solar sector outpaced wind and became a preferred choice. Out of all renewables, the total open access solar capacity in India is currently estimated at 2,894 MW, just 12% of the total solar capacity in the country. 

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The Open Access market is witnessing a new trend as an exchange-based business model, similar to that seen in the developed markets. The new trend is emerging at an opportune time since the market-clearing tariffs at the exchange are more attractive than those arrived in the competitive bids and still lower than the Average Pooled Purchase Cost (APPC). Further, the market-clearing price in GTAM is ~₹ 0.30-0.40/ kWh higher than DAM.

Connectivity arrangements for Open Access projects

As per Central Electricity Regulatory Commission (CERC), the power projects are provided interstate connectivity under Short Term Open Access (STOA), Medium Term Open Access (MTOA), and Long Term Open Access (LTOA). Power from the projects having LTOA gets first preference followed by MTOA and then STOA. For renewable energy plants where the utilization of the transmission grid is barely 20%-30% and as a result, the charges for MTOA and STOA are 4-5 times cheaper than that of the LTOA. 

Predictable and unpredictable charges drive the Open Access market

There are various charges and losses which drive the bankability of open access projects. These charges are defined by the CERC. However, the State Electricity Regulatory Commissions (SERCs), in consultation with the DISCOMs and other stakeholders, is responsible to determine the values. For subsidizing agricultural and residential consumers, the C&I consumers are charged a higher tariff through the levy of Cross Subsidy Surcharge (CSS). Open Access projects require long-term visibility on applicable charges and losses to maintain projects bankability.

Competitive landscape

Capacity installation under Open Access has been irregular due to the high dependency on regulations. Until FY2017, Madhya Pradesh, Maharashtra, and Rajasthan were the leading states in the country for Open Access projects. However, the business environment changed with the introduction of Karnataka’s policy that offered a 10-year waiver. Andhra Pradesh, Telangana, and Tamil Nadu also had launched favorable policies.

Indian Corporates dominate the Open Access market, in terms of project installations. 47.8% of the total developers’ market share was covered by Indian corporates as of December 2020. Followed by 28.9% by four C&I focussed companies, 14.6% by four utility-scale focussed companies, and 8.7% by Government PSUs. 

TCCL has developed a ranking matrix for the states. It is highly likely the capacity addition for renewable Open Access projects would be centered in the top 7 states in order of, Gujrat, Maharashtra, Uttar Pradesh, Karnataka, Rajasthan, Chattisgarh, and Tamil Nadu, respectively. 

TCCL is registered with the Reserve Bank of India (RBI) as a systemically important non-deposit accepting non-banking financial company. TCCL claims that it has financed approx. 10.1 GW Renewable capacity and more than 240 projects, and shunted 15.8 million tons of annual carbon emission.