“OPEN ACCESS” AND ITS BENEFITSOctober 22, 2018
“In order to install Solar Panels on their rooftops, many companies fail to provide sufficient space, as their contracted demand with the distribution licensee is not directly proportional to the factory/ office space usage. This was hindering the solar energy utilisation based on the concept of Net Metering. Further, the Net Metering in most Indian States is allowed only upto a capacity of 1.00 MW and not above. Therefore, for a company with higher load/demand and willing to reduce its costs towards energy consumption, Net Metering could not always be an ideal solution. In contrast, for such purposes, one can go with the concept of Third Party Open Access or Captive Solar power consumption through Open Access, which is long term could prove to be the most beneficial one. In view of the above, let us get a deeper understanding of the concept of Open Access and how the majority can benefit from it.”
This concept of Open Access allows our customers to choose a better power source alternative, rather than being forced to buy power from the local utility monopoly at ridiculous prices. As a consumer with bulk load can avail the benefits of cheap and green solar power by purchasing it through from an offsite solar farm under Open Access mechanism.
It not only helps the Industrial & Commercial consumers by ensuring regular electricity supply at less competitive rates but also enhances the business of green power markets by purchasing through an offsite solar farm under Open Access.
Buying power through Open Access from a Solar PV plant also helps heavy consumers who are already sourcing conventional power through Open Access to meet their Renewable Purchase Obligations (RPOs) as well.
Let us discuss some of key benefits of sourcing power through Open Access which makes it one of the most efficient ways to deal with the problem of higher energy costs:
- Reduction of Energy procurement costs, which can translate into profitability
- Single Tariff rate for the period of 25 years, which would not get affected by State Distribution Licensee’s Tariff inflation
- No restriction of contracted capacity on account of availability of roof space
- Fulfill Solar RPO obligation if already procuring power through Open Access from conventional sources
- Avail Tax benefit if consuming power from captive plant
Based on the location of the purchasing and selling entities, Open Access can be classified into two type:
Inter-State Open Access: Under this mechanism, the selling generating station and the purchasing entity belong to different States and the transmission line access has to be sought from Power Grid Corporation of India Ltd., apart from the local discom approvals. Regulations in relation to such Inter-State Open Access transaction are framed by Central Electricity Regulatory Commission (CERC). The access rights under inter-state open access can be for Short Term i.e. for less than a month period, Medium Term i.e. for 3 months to 3 years period or for Long-Term i.e. for twelve to twenty-five years period.
Intra-State Open Access: Under this mechanism, the purchasing entity and selling generating station belong to the same State and the transmission/ distribution line access has to be sought from the State Transmission Licensee / State Distribution Licensee. Regulations in regard to the same are framed by State Electricity Regulatory Commission (SERC). It can also be classified as Short Term, Medium Term and Long Term where the duration of these terms vary based on the regulations of respective States.
The buyer and seller of electricity can opt for either collective or bilateral transactions. In collective transaction, the trading of electricity is facilitated through exchanges with a very small margin fixed towards exchange members. In case of bilateral transaction, a Power Purchase Agreement is signed between the seller and the consumer for buying power at mutually agreed tariff for predetermined period. Many of the leading solar players in India are resorting to bilateral agreements for tariff determination with commercial and industrial clients.
As discussed above, operators under Open Access have to incur various charges for using the grid; some of them are exempted for solar power users. These charges vary from State to State and are lesser in States with stable grid and favourable regulatory regime. Most of the Open Access solar projects in India are currently in Madhya Pradesh, Andhra Pradesh, Karnataka, Chhattisgarh and Gujarat.