29 March 2018 | Sangeetha Suresh
Uttar Pradesh (UP) has recently amended the Captive and Renewable Energy Regulations 2014 to provide 50% exemptions from transmission and wheeling charges for intra-state open access sale of solar power. The state agencies have been reluctant to provide OA approvals in the past. There is virtually no OA solar capacity in the state. But this amendment, in line with the state solar policy, indicates the state government’s intent to finally open doors to the open access (OA) market.
Figure: Electricity consumption by consumer category in UP in 2015-16
Source: All India Electricity Statistics, General Review 2017, CEA
This figure shows that the industrial sector accounts for 34% of total power consumed in the state although almost 38% of their requirement is met from captive sources. The state has a relatively low cross-subsidy surcharge (CSS) of INR 0.60/ kWh for industrial consumers which makes OA solar about 25% cheaper than grid power. Commercial consumers are also eligible for OA power but CSS for them is prohibitively high at INR 4.52/ kWh.
Project developers could avoid CSS by opting for the group captive route but regulators are increasingly challenging this approach.
A comparison of OA solar cost under multiple scenarios (before exemptions, after exemptions and for captive sources) with other sources of power shows that OA can be a very attractive route for industrial and commercial consumers.
Figure: Cost of power from different sources in UP
Source: BRIDGE TO INDIA analysis
Note: We have assumed base cost of solar power and conventional power at INR 4.50/ kWh and INR 3.50/ kWh respectively to calculate total landed cost of OA power.
OA market in other states such as Karnataka and Madhya Pradesh has attracted large IPPs such as ReNew, Avaada, Shapoorji Pallonji, Aditya Birla, Hero and AMP. As these states shut down following withdrawal of incentives, UP could be the next hope for OA market.