Open Access Charges: When Solar Fails To Deliver Promised Savings

Sanjay Vashishtha

The concept of open access in the electricity market was introduced to foster competition and provide consumers with the freedom to choose their electricity suppliers. However, despite the potential for savings, the reality is that net landed solar electricity often does not result in significant cost reductions for end consumers. This outcome is largely due to the various open access charges imposed by different states, which can substantially increase the overall cost of electricity.

Here’s a closer look at how different states apply these charges and how they impact the cost-effectiveness of solar electricity for consumers.

Not As Open As Expected

Open Access Charges: An Overview

Open access charges are levied by State Electricity Regulatory Commissions (SERCs) to cover various costs associated with the use of the electricity grid. These charges include:

1. Cross Subsidy Surcharge (CSS)
2. Additional Surcharge (AS)
3. Wheeling Charges
4. Standby Charges

Each of these charges serves a specific purpose, but together, they can add a significant financial burden to open access consumers.

Cross Subsidy Surcharge (CSS)

CSS is designed to compensate distribution companies (Discoms) for the loss of high-paying consumers who switch to open access. This surcharge is calculated based on the difference between the tariff applicable to the consumer category and the cost of supply.

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• Andhra Pradesh: ₹1.72/kWh (HT), ₹2.16/kWh (EHT)
• Gujarat: ₹1.20/kWh (HT), ₹1.50/kWh (EHT)
• Haryana: ₹0.76/kWh (HT), ₹1.00/kWh (EHT)

Additional Surcharge (AS)

AS covers the fixed costs that Discoms incur due to their obligation to supply electricity even when consumers shift to open access.

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• Andhra Pradesh: ₹0.30/kWh
• Gujarat: ₹0.10/kWh
• Haryana: ₹1.25/kWh

Wheeling Charges

These charges are levied for using the distribution network of the Discom. The charges are calculated based on the cost of maintaining the network.

• Andhra Pradesh: ₹0.45/kWh
• Gujarat: ₹0.60/kWh
• Haryana: ₹0.25/kWh

Standby Charges

Standby charges are imposed to ensure that Discoms can provide backup power in case of generation or transmission outages. These charges are generally capped at 125% of the normal tariff for the respective consumer category.

• Andhra Pradesh: 125% of normal tariff
• Madhya Pradesh: 125% of normal tariff
• Punjab: 125% of normal tariff

The Impact of Open Access Charges on Net Landed Solar Electricity

When these charges are combined, they can significantly erode the cost savings that consumers expect from solar electricity. For example, consider a commercial consumer in Andhra Pradesh with the following charges:

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• CSS: ₹2.16/kWh
• AS: ₹0.30/kWh
• Wheeling Charges: ₹0.45/kWh
• Standby Charges: Assume 125% of normal tariff (let’s assume normal tariff is ₹6/kWh, so standby charges would be ₹7.5/kWh for the power used as backup)

The total additional cost per kWh would be: Total Charges=₹2.16+₹0.30+₹0.45+₹7.5=₹10.41/𝑘𝑊ℎTotal Charges=₹2.16+₹0.30+₹0.45+₹7.5=₹10.41/kWh

Given that the average cost of solar power might be around ₹3-4/kWh, the total cost to the consumer can rise to approximately ₹13-14/kWh when all open access charges are included. This makes solar power significantly more expensive than expected.

Conclusion

While the concept of open access is designed to provide consumers with more choices and potentially lower costs, the various charges imposed by states can negate these benefits. For solar power, in particular, the high additional costs mean that the net landed cost often does not lead to significant savings.

Consumers considering open access need to carefully evaluate these charges and their impact on overall costs to make informed decisions. Policymakers must also consider rationalizing these charges to truly unlock the potential of open access and renewable energy in providing cost-effective and sustainable power solutions.

Understanding these dynamics is crucial for any business or consumer looking to transition to open access solar power, ensuring they can make the most economically viable decisions.