India’s energy landscape is rapidly evolving, with solar power emerging as a crucial part of the country’s renewable energy mix. Among the various initiatives, open-access solar has shown significant promise.

Open access solar demand in India has grown considerably and consistently since 2019 as commercial and industrial entities realized the savings in operating costs, especially after the COVID-19 pandemic. Adding to the push for solar open access was the green energy open access regulations by the Ministry of New and Renewable Energy (MNRE).

India achieved 1.8 GW of solar open access capacity in the first quarter of 2024, and installations increased by 152% year-over-year. The installation numbers were skewed primarily because developers benefited from a few favorable short-term trends and pending projects from last year that were installed.

Falling module prices in China and the suspension of the Approved List of Models and Manufacturers (ALMM) regulations for projects commissioned until March 2024 provided an ideal opportunity for solar open access developers to import modules and commission projects at a low cost. Power purchase agreement (PPA) prices fell because of the dropping module prices, further incentivizing consumers to adopt solar open access.

These factors were outliers, which will not be present in the coming quarters.

While the growth has been impressive, significant challenges are impeding the development of open-access solar projects, and addressing these will be crucial for the sector’s continued growth.

Regulatory juggernaut

Steering the maze of regulations is one of the main barriers to the growth of open access. Sudhir Nain, Operations Head—Domestic at Jakson Green, said, “Navigating the regulatory hurdles in India’s clean energy sector has become increasingly challenging, with misinterpretations of captive rules, soaring open access charges, and the imposition of new levies. The long road to open access approvals, compounded by stringent banking regulations and state-level barriers such as the disallowance of group captive projects, highlights the uphill battle for investors.”

The tedious process of liaising with multiple entities is another frequently cited reason why open access has a long way to go. Developers must coordinate with agencies like state load despatch centers (SLDCs), DISCOMs, and transmission licensees.

Each entity has its own set of procedures and requirements, leading to a convoluted and time-consuming bureaucratic process. This complexity not only prolongs the project development period but also escalates costs.

A renewable energy developer said, “We spend months just navigating the administrative maze, which significantly delays our project timelines. A single-window clearance system would be a game-changer for us.”

“The need for streamlining this process cannot be overstated. Currently, developers must interact with multiple agencies to get various approvals, which can take months, especially in states that are not very hands-down on increasing solar capacity,” the developer added.

Stakeholders suggest a centralized system where developers can submit the documents and track the status of their applications. Such a system would significantly reduce the administrative burden and ensure that all relevant agencies have access to the same information.

This would prevent the need for repetitive submissions.

They also said laying down clear guidelines and timelines for each stage of the approval process would help developers plan better and avoid unexpected delays.

ISTS Charges

Another hurdle is obtaining waivers for Interstate Transmission System (ISTS) charges. Although these waivers are intended to incentivize renewable energy projects, the bureaucratic process to secure them is often slow and cumbersome.

Mercom had earlier reported that with the ISTS charges waiver approaching its expiration, developers are seeking an extension due to the shortage of substations.

Nain from Jakson Green spoke of infrastructure limitations, including insufficient transmission substations and the arduous process of obtaining waivers for ISTS charges, which further impede the progress of open-access projects.

Delays in commissioning new substations mean that even when new solar projects are ready to supply power, the lack of infrastructure prevents them from doing so efficiently. This shortfall can lead to grid congestion, affecting the stability and reliability of solar projects’ power supply.

The procedures to claim ISTS charges waiver are not standardized. This process can take several months, during which the financial dynamics of the project might change, especially if there are delays in the commissioning of transmission infrastructure.

Ensuring the timely commissioning of transmission infrastructure is crucial to mitigating these issues. This requires coordinated efforts between central and state governments to plan and execute infrastructure projects that can handle the increasing load from new solar installations.

Another open-access solar developer commented, “The lack of adequate transmission infrastructure is a significant issue. Even the best solar projects can’t deliver to their full potential without sufficient substations and grid connectivity. There’s an urgent need for investment in this area.”

Public-private partnerships can be crucial in attracting investment and expediting infrastructure development.

Inconsistent policy execution

Another hurdle arises from the non-uniform implementation of policies across different states.

Inconsistencies in policy execution continue to confuse and pose operational difficulties for developers.

“The lack of uniform policy implementation across states creates significant hurdles. Each state has its own rules, making it difficult to standardize our operations. A more harmonized approach would greatly benefit the sector,” the developer said.

For instance, Telangana’s open-access solar sector is seen as trailing behind due to the cautious approach of the state’s DISCOMs. They are hesitant because of the potential loss of high tariff-paying consumers.

Another issue arises from the erratic nature of government regulation and policies.

For instance, the MNRE recently notified the implementation of the ALMM regulation effective April 1, 2024. The new notification, however, eliminated the exemptions for projects under open access and rooftop solar by private parties, announced in an earlier order.

The removal of open access and unsubsidized rooftop solar projects from exemption comes as a surprise for most industry stakeholders who expected the government to continue the relaxation promised in the February directive.

Mercom India Research indicates that, as of December 2023, the reimposition of the ALMM mandate could affect a pipeline of 14 GW of solar open-access projects.

These inconsistencies create uncertainty and increase operational costs as developers customize their approach for each state.

Land acquisition challenges

Land acquisition remains another formidable obstacle for open-access solar projects. Developers often face difficulties securing contiguous land parcels, negotiating with private landowners, and obtaining timely approvals from the authorities.

While securing large, contiguous parcels of land is essential for the viability of large-scale solar projects, land in India is often fragmented, with multiple owners and unclear titles.

Will the idea of creating a land bank work? One solar developer thinks so. As per the Electricity Act, the government is tasked with fostering a profitable and competitive market for private entities. The developer thus proposes the creation of land banks.

“The government could establish land banks specifically designated for renewable energy projects. These land banks would consist of government-owned land readily available for lease or sale to developers, reducing the time and effort spent on land acquisition.”

“Incentivizing private landowners to lease or sell their land for solar projects could help assemble larger, contiguous parcels more efficiently.”  While the open-access solar project market is growing India’s renewable energy future, overcoming the existing challenges is essential for sustained growth.

Streamlining bureaucratic processes through a single-window clearance system, simplifying the ISTS charges waiver claim process, and ensuring uniform policy implementation across states would significantly reduce the administrative burden on developers.

Gyanesh Chaudhary, Chairman & Managing Director of Vikram Solar, emphasizes the potential of open access to promote solar energy. “Open access solar is one of the bright spots in the country’s solar market, attracting businesses with substantial cost savings as solar costs decrease and retail electricity prices rise. With a strong pipeline of nearly 14 GW capacity projects under construction and a convergence of economic benefits, environmental concerns, and technological advancements, the solar open-access business is poised for significant growth in the coming quarters.”

The commercial and industrial units that are significant contributors to India’s GDP are also crucial to reducing carbon emissions and combatting climate change. Green energy open access is critical for these entities to meet their renewable purchase obligation and reduce their carbon footprint.

The concerted efforts of government agencies, private developers, and local communities will be key to achieving a cleaner and more sustainable energy landscape in India.

According to the Q1 2024 Mercom India Solar Open Access Market Report, as of March 2024, Karnataka remained the top state for cumulative installations, accounting for nearly 30% of solar open access capacity added in the country as of March 2024. Maharashtra and Tamil Nadu ranked second and third, accounting for 13% and 11% of cumulative installations.