While the large solar policy allocations take all the limelight, there are very interesting niche markets developing in India. These markets are typically driven by favourable end-user economics and require less government support. Depending on the quality of the local grid, on the policy support and availability of on-site space, end consumer could go for open access or rooftop solar solution. Rooftop solar is slightly more expensive but it has no grid risk exposure and sizes are constrained by rooftop availability, where as open access is more scalable and cheaper option but comes with the risk of unpredictable grid usage costs.

While open access market is still in an early stage, buying solar from such projects is an increasingly attractive option for India’s power consumers.

• India’s first open access solar projects have broken the regulatory ice
• These projects can thrive where power tariffs are high, the grid is robust and regulations are favourable
• Open access project returns will likely remain at risk from unpredictable grid usage costs

Open access projects are typically set up for power supply to industrial consumers, who pay relatively high tariffs for often erratic power supply from the grid. The concept of open access is enshrined in the Electricity Act 2003, which allows a buyer with a connected load of more than 1 MW to procure power directly from the market through the grid. For using the grid, the power producer (and ultimately, the power consumer) typically has to bear the costs of transmission and distribution losses, as well as wheeling and banking charges.

The rationale behind open access power transactions is to encourage competition in the power market and allow customers to choose among a number of power suppliers rather than just from the local utility.

A variation of the open access model is the captive or group captive model, wherein the power consumer takes a significant share of the ownership of an off-site power generation asset.

Most current open access solar projects are based in Rajasthan, Madhya Pradesh and Andhra Pradesh as these states provide the most favourable regulatory environment. They offer waivers in transmission and wheeling charges as well as exemption from cross subsidy surcharges. States where open access projects does not make sense due to high grid losses and grid instability are Uttar Pradesh, Bihar, Tamil Nadu, Odisha and West Bengal.

Open access projects have so far been mainly developed primarily by mid-size players. Most of these developers are focused geographically only on states where they have easier access to land and have favourable open access policies. For example, Ujaas is developing solar parks exclusively in Madhya Pradesh with more than 100 MW in total capacity. Similarly, Emmvee is focusing on Andhra Pradesh (20 MW capacity), while Rays Power Experts, has projects at multiple locations in Rajasthan such as Baap (10 MW), Kolayat (25 MW) and Gajner (60 MW).

Though the open access market has started to grow, it still faces challenges. The most important is the uncertainty about the future charges for using the grid such as future open access charges and grid losses. These charges are subject to revision every year by the State Electricity Regulatory Commission (SERC). This makes assessing the financial viability of a long term open access solar project difficult and affects the bankability of such projects. In most states, utilities lobby hard with the SERCs to increase open access charges, in order to cut out competition for their most high value consumers who pay the high industrial and commercial tariffs. Another most important risk for open access projects, apart from policy uncertainty, is the PPA default by private customers. A private customer’s inability to consume power and/ or pay for it over a long-term period, of say 15 years, is a substantial risk.