Many businesses want to power their operations sustainably but don’t have enough space on-site for solar panels. Some companies may also prefer not to make a large capital investment in solar.
Both these types of businesses can benefit from open-access solar.
Open access allows commercial and industrial (C&I) consumers with high electricity needs to purchase green energy directly from off-site renewable energy farms.
In this blog, we’ll explore how open-access solar works and the two main ways in which this green energy exchange happens.
How does Solar Open Access Work?
In India, green energy open access is available to all C&I consumers with a load demand of 100kW or higher.
To source solar energy through open access, the consumer enters a Power Purchase Agreement (PPA) with an Independent Power Producer (IPP). The power producer sets up an off-site solar farm in a location with ample sunlight and sells the generated power to the consumer at a pre-decided tariff.
The electricity is transferred directly to the consumer’s premises through the grid.
Open access helps businesses meet their electricity requirements sustainably and fulfill their Renewable Purchase Obligations (RPOs) with minimal or no financial investment. It also helps them cut 30-60% of electricity expenses, as solar energy is substantially cheaper than traditional power.
The exchange of power through open access happens in two major ways:
1. Captive / Group Captive Solar Open Access
Captive solar farms are built for a single company’s own energy needs. In these cases, the company invests some money (equity) and owns part of the plant.
When several companies join together to fund a larger solar farm and use the energy for their operations, it’s called a group captive solar project.
Under the Green Energy Open Access 2022 guidelines, these projects must meet two main requirements:
- The company or group must own at least 26% of the solar project.
- They must use at least 51% of the energy generated for their own operations.
Here’s how this model works:
- A power producer develops the solar project, often through a SPV (subsidiary company), and offers a minimum 26% stake to a business.
- If the project is financed 70% through debt (borrowing from a lender) and 30% equity, then the business only has to invest 26% of the 30% equity, which is equal to about 7.8% of the total project cost.
- The power producer operates and maintains the plant and transfers the generated power to the business.
Advantages of Captive Solar Open Access
With part ownership, businesses have more control over power generation. This in turn, leads to greater energy
- With part ownership, businesses have more control over power generation. This in turn, leads to greater energy savings compared to the third-party open access model.
- Companies can lower their capital investment by partnering with other businesses and jointly investing in the project.
- Open access consumers usually pay a cross-subsidy surcharge, which helps fund subsidized green energy for sectors like agriculture and residential users. However, captive solar open access consumers are exempt from this surcharge and an additional surcharge, leading to greater annual savings for them.
- Many Indian states offer captive consumers power banking facility, so they can store unused electricity in the grid and use it later when needed.
- Since the business (or businesses) owns a portion of the plant, they are also eligible for Renewable Energy Certificates (RECs) that can be monetized later, along with appreciated depreciation benefit on the solar asset.
2. Third-Party Solar Open Access
If a business wants to power its operation through solar energy without making any upfront investment, it can opt for third-party open access model.
In this scenario, a business can bypass their utility provider and source its electricity from an Independent Power Producer (IPP) with a solar farm. The two entities then enter a long-term contract called the power purchase agreement (PPA).
The PPA lists the terms for the sale of power, including the price of electricity, time period and other obligations.
Here’s how this model works:
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The IPP owns, operates, and maintains the solar facility.
- The power generated is sold to multiple businesses based on the pre-decided PPA terms.
- The electricity is transferred to the consumer through the grid infrastructure.
Advantages of Third-Party Open Access Solar
- The business does not invest any money for the solar plant setup and only pays for the power it uses.
- Even without owning the plant, a third-party open-access consumer can save up to 40% on electricity costs, as solar tariffs are lower than regular power rates.
- The business avoids risks related to low power generation or plant maintenance, as these are handled by the third-party developer.
How Can You Choose the Right Model?
Consider these 3 factors before making the decision:
1. Investment Capacity
- Captive Solar: Works for businesses that have the capital to invest and a long-term interest in renewable energy ownership
- Third-Party Open Access Solar: Ideal for businesses wanting to avoid large capital investment.
2. Savings Potential
- Captive Solar: Generally offers higher cost savings in the long run.
- Third-Party Open Access Solar: Provides moderate savings as consumers also have to pay cross subsidy and additional surcharge along with other costs levied by the developer.
3. Risk and Responsibility
- Captive Solar: Suits those who can handle some solar plant responsibilities or partner with experts for plant management.
- Third-Party Open Access Solar: All risks of low generation and maintenance are managed by the third-party, making this a hassle-free option for the consumer.
About Ornate Solar
Ornate Solar is a leading solar company with 10 years of experience in the industry and a mission to reimagine solar installation worldwide.
By partnering with best-in-class solar brands and developing high-quality solutions (inverters, accessories, InRoof), we deliver solutions that are modern, reliable, and effective.
If you are looking for high-quality solar solutions, reach out to us at 011 43536666 to discuss your options.
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