State distribution companies (discoms) are biggest obstacle on open access for solar power

Open access (OA) was one of the main components of the Electricity Act (2003), introduced in an effort to attract private investment in the electricity generation sector, thereby encouraging competition.

There is an increasing opportunity to innovate in solar markets in India thanks to the rapidly declining price of photovoltaics (PV). While large-scale ground-mounted solar parks are seeing tremendous growth, an area that still remains largely untapped is open access (OA) for the sector.

Open access (OA) was one of the main components of the Electricity Act (2003), introduced in an effort to attract private investment in the electricity generation sector, thereby encouraging competition.

OA allows bulk consumers (>1 MW) to enter into agreements with independent power producers (IPPs) for procuring electricity via power trading markets. The involved parties would use the existing electricity network by paying a nominal fee, per kWh, to the operators.

In an effort to foster growth of renewable energy (RE) in Karnataka, the state government incorporated a clause in its RE policy in 2014 allowing OA for solar and wind without paying any fee till March 2018. The foundation has been laid for industries and others to access stable power at lower rates. However, implementation of OA in any state — whether for solar or from any other source — has not been smooth.

Among the biggest obstacles are the distribution companies (discoms) and their ailing finances. Karnataka’s discoms, like many in other states, are heavily reliant on industrial and commercial consumers for crucial revenue. OA threatens to take these consumers with its promise of power at cheaper rates.

Industrial and commercial consumers can achieve 25-40 per cent savings by signing solar OA power purchase agreements (PPAs) at Rs 4.6/kWh — the prevailing OA rate — instead of procuring power from discoms at more than Rs 6.75/kWh. Discoms vehemently oppose such agreements, citing technical and financial reasons. This has led to many solar developers, consumers and EPC (engineering procurment construction) players filing petitions at various levels of government and judiciary with little or no success.

Despite Karnataka’s initiative, its solar capacity linked to OA stands at less than 30 MW today. On the other hand, rooftop PV (RTPV) constitutes 40 GW out of India’s total 100 GW solar target for 2021-22. This sector, however, significantly lags behind large ground-mounted solar parks with only around 1.3 GW of the 12.8 GW solar installed capacity in the form of RTPV today.

This is again primarily because of the financial state of discoms and their inability to pay rates higher than the average pooled power purchase cost (APPC), thus making business cases for prospective consumers unviable. Financial institutions thereby perceive a risk and do not easily sanction loans.

In spite of this, there are a plethora of domestic consumers who are willing to install RTPV systems. Many of these affluent consumers live in apartments or in houses which do not have suitable rooftops. If these domestic consumers were to be aggregated together to form a “group captive” unit (similar to community solar schemes in other states), developers could set up ground-mounted plants at lower costs and transfer power which can be apportioned and accounted for directly to consumers under the OA scheme.

Since this category of consumers pay the discoms lesser rates than commercial and industrial consumers, they also will not feel the pinch as much if some domestic consumers switch to solar OA and achieve savings in the range of 20-30 per cent.

Pebble Bay apartment, in Bengaluru, is a good example to consider. Three hundred consumers, with a sanctioned load of 7 kW each, wish to go green and invest in RTPV but do not have the rooftop space to install 2.1 MW of capacity. A developer could install this nearby and allocate capacities to the Pebble Bay consumers. The developer’s cost of Rs 9 crore would be much lesser than the cumulative cost of Rs 15 crore if each 7 kW RTPV system were to be installed separately. The developer can charge a premium for facilitating the entire process and still each consumer would pay much lesser per kW and reap the benefits of clean energy.

Initial internal research shows that more than 500 MW can be installed within the jurisdiction of Bangalore Electricity Supply Company Ltd alone, under such a provision, with a resultant increase of 20 paisa/kWh in the tariff structure.

Experts in the field have recently opined that the 100 GW target might not be achieved because of slow RTPV uptake. Allowing OA for domestic consumers will enhance participation of domestic consumers in the solar sector and alleviate the discoms’ financial burden of paying RTPV consumers, thereby contributing significantly to the 100 GW target. Consumer awareness and participation of Discoms will go a long way in allowing OA innovations to thrive in the near future.

Source: IANS