A Comprehensive Guide to Open Access Solar Power

In the commercial world, there is a growing voice for sustainability in business operations. Many companies today are looking for ways to reduce their carbon footprint and embrace renewable energy alternatives. Local DISCOMs are known to be the monopoly providers of grid electricity services. Grid power is offered at exorbitant prices, not to mention the inconvenience of prolonged and unpredictable power cuts.

Open-access electricity is challenging and changing the conventional power distribution arrangement for the better. Commercial users with a bulk load can procure low-cost electricity from the competitive open market. There are multiple power companies competing to offer high-value, low-cost electricity services.

Solar power is a clean and cost-effective power source to meet electricity demands while reducing energy bills. Solar open access allows corporations to procure a significant share (even 100%) of renewable energy to power their business operations. Many customers can’t install on-site solar plants due to space constraints or the heavy burden of capital investment. The open market lets you enjoy the advantages of scalable, environmentally-friendly electricity with zero upfront investment.

What Is Open Access in the Power Sector?

Open access power is a market where both power generators and heavy power consumers have non-discriminatory access to power transmission and distribution infrastructure. Open access in the power sector allows consumers (usually those with over 1 MW of connected load) to purchase electricity from one of the several power generators available on the market. Consumers can choose a generator located anywhere in India. Solar power through open access can be sourced from a solar farm established in one state and transmitted to a consumer located in another city within the same state or another state.

Total Installed Capacity in the Solar Open Access Sector

As of September 2022, the total installed capacity of solar energy in the open-access segment was over 7 GW. The projects in their development and pre-construction phases were 5 GW. Over the years, the number of corporations sourcing solar electricity through the open access route has been increasing. The growth could have been exponential if not for the price rise and supply constraints.

Unlike the traditional arrangement where consumers are forced to receive electricity supply from their area DISCOM at high tariff rates, the solar open access network gives consumers the liberty to choose from several generators. The Electricity Act of 2003 authorised consumers with over 1 MW of sanctioned loads to purchase electricity directly from generators and pay specific open access charges and taxes.

How Open Access Power Works

• The consumer with a heavy connected load (or off-taker) enters into a long-term power purchase agreement (PPA) with the power generator of their choice. The principal governing contract is a minimum of 10 years or more. Consumers are likely to find open-access power tariffs to be much lower than the current grid tariffs.
• Your generator would have planned and executed the entire project of setting up a utility-scale solar plant in a remote location. In the captive model, the electricity off-taker will have to make an equity investment as per the necessary rules.
• For a predefined tariff rate, the solar electricity produced through the solar open access route is sold to the off-taker.
• Solar energy producers are able to ensure a consistent supply of electricity without power outages. To that end, they employ remote monitoring technologies and real-time analytics.
• In this open access electricity arrangement, the consumer pays for the units of electricity consumed at lower tariff rates, which results in savings right from the beginning.
  

Open Access Charges

Open access charges are levied on the off-taker for procuring solar electricity transmitted from a remotely located solar farm via the transmission infrastructure. The various components making up this cost are wheeling charges, transmission charges, losses, and other necessary charges. These components of open access charges vary from state to state based on factors like mode and duration of open access power, connectivity, and voltage level.

Here’s an illustration of open access charges calculated for interstate transmission of solar electricity using the examples of Rajasthan and Haryana.

• Injection State: Rajasthan
• Injection Level: CTU
• Drawl State: Haryana
• Drawl Level: STU/DISCOM
• Drawl Connectivity Voltage: 132 kV
• OA Mode: Captive
• OA Duration: LTOA/MTOA
• Tariff ex-bus bar: 4.00 INR/kWh

Based on these inputs, the following are the open access charges for the transmission of solar electricity from Rajasthan to Haryana:

• Open access charges: 1.39 INR/kWh
• CTU charges: 0.00 INR/kWh
• CTU losses: 0.13 INR/kWh
• STU charges: 0.37 INR/kWh
• STU losses: 0.10 INR/kWh
• Wheeling charges: 0.47 INR/kWh
• Wheeling losses: 0.00 INR/kWh
• Cross-subsidy surcharge: 0.00 INR/kWh
• Additional surcharge: 0.00 INR/kWh
• LDC charges: 0.15 INR/kWh
• Banking charges: 0.17 INR/kWh
• Electricity duty: 0.00 INR/kWh

Transmitting solar power from Rajasthan to Haryana levies a landed OA tariff of 5.39 INR/kWh. This open access charge includes all the components mentioned above. The landed OA tariff is determined based on the injection state and the drawl state, as well as other important factors like the mode and duration of open access and other factors.

Advantages of Open Access to Electricity

Sustainability
Going solar can improve your business’s corporate social responsibility (CSR) image. As one of the cleanest energy sources, solar electricity can help you demonstrate your commitment to sustainability and environmental protection, thereby earning your stakeholders’ trust and confidence.

Source: 100% solar energy
Through the open access power route, corporations can meet 100% of their electricity requirements through renewable energy. This is easily done by obtaining electricity from a producer in the open access network instead of your area DISCOM.

No space is required.
Not all commercial spaces have the space to set up an on-site solar plant. In an open-access power arrangement, you can buy solar electricity from remote solar farms at much lower tariff rates without having to make a hefty upfront investment.

Reduced electricity costs
The solar energy tariffs in open access are significantly lower in comparison to the grid electricity tariffs. With reduced per-unit electricity, your business is able to lower its operational costs and improve its bottom line.

Conclusion

Solar open access is a highly advantageous option for businesses looking to use electricity produced via renewable energy sources. To ensure that you secure the best solar power tariffs for your business, make sure you consider the open access charges for different locations before making the switch.

The government of India is encouraging commercial consumers to embrace solar to power commercial activities. To this end, favourable policy decisions are being made to reduce open access charges for consumers.

FAQs About Open Access Solar Power

How can corporations meet their RE100 goals by leveraging open access power?

Most businesses face space constraints when it comes to installing a large-scale solar power plant. Utility-scale open-access solar plants resolve this challenge. These plants generate solar electricity in large amounts to meet the substantial power demands of commercial users.

What power procurement models are used in solar open access?

The common procurement models available for consumers and producers are PPAs and captive or group captive models.

What are the various components of open access charges?

Injection and drawl states, as well as procurement models, are the key factors that determine open access charges. The various components influencing the open access mechanism include the following:

• Transmission charges
• Transmission losses
• Wheeling Charges
• Wheeling losses
• Banking charges
• Cross-subsidy surcharge (CSS)
• Additional surcharge (AS)

How can a corporate user evaluate different PPAs in the open-access market?  

As a consumer, here is the right approach to evaluating different PPAs in the solar open access sector.

• Due diligence based on the solar farms’ locations
• Learning about the risks associated with open access
• Due diligence on the solar power producer
• PPA negotiations

What are the challenges and risks associated with the utility-scale solar open access market? 

Contractual Challenges: 

• Tenor mismatch between PPA and loan
• Contract standardisation
• Contract enforcement

Operational Challenges: 

• Performance risk
• Grid curtailment risk

Regulatory Challenges: 

• Uncertainty around open access regulations and charges
• Paper-based approval process
• Inconsistency in eligibility and operating criteria for open access
• The utility point of view
• Exclusion from Open Access

Amplus Solar

April 25, 2024