Understanding Captive And Group Captive Solar Projects In India’s Open Access Market

In India, solar power projects can be established in various ways, with two notable models being captive solar projects and group captive projects in the context of open access. Both models allow consumers to generate their electricity and reduce their dependency on grid power, but they have distinct regulatory frameworks, benefits, and operational mechanisms.

Captive solar projects are set up by an individual or a group of consumers who consume at least 51% of the power generated by the project. The key feature of a captive project is that it is primarily for self-consumption. The Electricity Act, 2003, defines a captive generating plant and provides certain concessions and benefits to encourage its adoption.

For a project to qualify as captive, the consumers must own at least 26% of the project’s equity and consume at least 51% of the power produced. Captive consumers can utilize the open access framework, which allows them to use the transmission and distribution network to supply the generated electricity to their premises. Captive projects often receive exemptions from certain charges such as cross-subsidy surcharge (CSS) and additional surcharge. These charges are usually levied on consumers procuring power through open access from third-party suppliers to compensate for the loss of high-paying customers for distribution companies (DISCOMs). Some states offer net metering for captive solar projects, allowing the consumers to send excess power back to the grid and receive credits.

Group captive projects are similar to captive projects but involve multiple consumers pooling resources to set up a solar power plant. These consumers share the ownership and the power generated according to their equity share.

Each consumer in a group captive project must hold a minimum of 26% equity and collectively consume at least 51% of the power generated. Like individual captive projects, group captive projects use the open access framework to transmit power from the solar plant to the consumers’ locations. Group captive projects also benefit from exemptions on cross-subsidy surcharge and additional surcharge, similar to individual captive projects. This makes them financially attractive for businesses looking to reduce electricity costs. Group captive models offer more flexibility as they allow multiple consumers to participate, which can lead to better utilization of the generated power and reduced costs per unit of electricity.

Captive projects require a single or a single entity’s predominant ownership and consumption, whereas group captive projects involve multiple consumers sharing ownership and consumption. Both models must comply with regulations regarding equity and consumption but have slight differences in administrative requirements and benefits. Both models benefit from open access and exemptions from certain surcharges, but the financial structuring can vary significantly. Group captive projects may have more complex financial arrangements due to the involvement of multiple stakeholders.

Both types of projects involve similar development processes, including site selection, obtaining clearances, and setting up the solar plant. However, group captive projects may require more coordination among the various stakeholders. In captive projects, the Power Purchase Agreement (PPA) is typically straightforward between the project and the consumer. In group captive projects, multiple PPAs or a single joint PPA with all stakeholders might be needed. Captive projects generally have simpler billing mechanisms, while group captive projects may involve more complex billing and settlement processes to account for each participant’s share of power and costs.

Captive and group captive solar projects in open access are powerful tools for businesses and large consumers to manage their energy costs and transition to renewable energy. By understanding the regulations, benefits, and operational nuances, consumers can make informed decisions about which model suits their needs best. The Indian government’s supportive policies and regulatory frameworks play a crucial role in making these projects viable and attractive for consumers looking to adopt sustainable energy solutions.