BackOpen access clean energy projects face regulatory constraints: ICRA
Open access allows large users of energy, typically those who consume over 1 megawatt of power, to buy power from the open market, instead of depending on a more expensive grid.Discoms have been discouraging clean energy developers to use their networks to supply electricity to consumers.
PremiumThe distributed renewable energy generation developers that supply electricity to the commercial and industrial (C&I) segment by leveraging ‘open access’ provisions are facing regulatory constraints.
“Regulatory constraints pose headwinds for open access based RE (renewable energy) projects, amid a favourable demand outlook for such PPAs (power purchase agreements)," ICRA said in a statement on Thursday.
Open access allows large users of energy, typically those who consume over 1 megawatt of power, to buy power from the open market, instead of depending on a more expensive grid. However, the state electricity distribution companies (discoms) have been discouraging clean energy developers to use their power transmission and distribution networks to supply electricity to third-party and captive consumers.
“The overall open access charges for third party based IPPs vary widely across the key states ranging between ₹2–5 per unit and have shown an increasing trend over the period, given the limited progress in tariff rationalization for the grid tariffs set by the SERCs for the state-owned distribution utilities (discoms)," Girishkumar Kadam, senior vice president and co-group head, corporate ratings, ICRA, said in the statement.
Mint had earlier reported about Haryana’s discoms not allowing solar power developers to use their power transmission and distribution networks to supply electricity to third-party and captive consumers by imposing new conditions.
“Further, state-owned discoms in most cases show a passive resistance, due to apprehensions of losing cross-subsidising/high tariff paying C&I customers," Kadam added.
C&I projects are generally insulated from risks such as power procurement curtailment and tariff-shopping by discoms. They supply electricity to third-party and captive consumers who buy power from them, instead of depending on an expensive grid.
“Independent Power Producers (IPPs) in the renewable power sector selling power in the open access route (third-party or group captive mode) are faced with increasing regulatory constraints in the form of upward revision of open access charges, denial of open access approvals and tightening of energy banking norms," the statement said.
Ensuring open access will also help attract large green electricity consumers in setting up their own captive green energy plants.
“Notwithstanding the regulatory headwinds in the open-access segment, the outlook on the renewable energy sector remains stable," the statement added.
This comes against the backdrop of power and new and renewable energy minister Raj Kumar Singh on Wednesday announcing approval of future open access applications within a fortnight, as part of the proposed ‘green tariff’ plans.
India’s solar and wind power tariffs hit an all-time low of ₹1.99 per unit and ₹2.43 per unit, respectively following the pandemic. The countis running the world’s largest clean energy programme to achieve 175 gigawatt of renewable capacity.
“Further, with improving tariff competitiveness of renewables particularly in the solar and wind power segments, the renewable power policies in several states have been amended over the last 3-4 year period. States have either completely withdrawn or reduced the concessions/incentives on open access charges, in respect of procuring power from solar and wind power projects under the open access route," the statement said.
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