Chhattisgarh, which has traditionally relied on coal sources for its energy requirements, has recently seen a surge in solar capacity additions, accounting for about 5% of the 13.6 GW installed capacity in the state as of September 2023.

The state has witnessed a dramatic increase in open access solar from 3 MW in the second quarter (Q2) of 2023 to 28 MW in Q3 2023, according to Q3 2023 Mercom India Solar Open Access Market Report.

By the end of September 2023, Chhattisgarh’s cumulative open access solar capacity reached 380.7 MW, making it the ninth highest in the country, accounting for 3.5% of the country’s total.

The state’s recent policy adjustments, particularly certain exemptions for open access, have decisively boosted Chhattisgarh’s overall solar capacity.

The Chhattisgarh State Electricity Regulatory Commission (CSERC) amended the Grid-Interactive Distributed Renewable Energy Sources Regulations 2019 to provide financial incentives for the development of open access solar projects.

The amendments exempt the first 500 MW of such projects from transmission, wheeling, state load dispatch center (SLDC) charges, and the cross-subsidy surcharge for the entirety of their operational life.

This exemption was applicable to projects that achieved commercial operation by December 27, 2023.

Policy Reboot Driving Renewables

The exemptions granted on surcharge accelerated solar capacity additions under open access.

Ashish Verma, Vice President of Business Development at Gensol, confirmed the positive impact of the policy changes on the market. “With Chhattisgarh being home to numerous heavy industries, including steel and metal, and the emergence of decarbonization plans, the state is witnessing a positive shift.”

Taking advantage of Chhattisgarh’s favorable open access policy, developers are actively exploring the state’s potential for renewable energy projects. According to Mercom India’s research, a 20% quarterly increase in the state’s open access solar capacity by the end of the fourth quarter of 2023 is likely.

The regulations also aim to democratize access by reducing the minimum power contract requirement from 500 kW to 100 kW, making it possible for even smaller consumers to adopt solar.

Surajit Chanda, AVP of Business Development of Aditya Birla Renewables, said, “Incentives are pivotal to attracting developers to a state, ensuring savings on the project cost. Karnataka’s success with similar measures five years ago serves as a testament to the effectiveness of such approaches. The state is experiencing growth, and with increasing confidence in the market, more relaxations are welcome, which will catalyze a boost. Chhattisgarh has had a promising start and is poised to become a prime destination for open access developers to sell power.”

The state’s exemptions on open access charges have also prompted commercial and industrial (C&I) customers to consider transitioning to solar through open access models, with the aim of achieving significant cost savings on their energy expenses.

The C&I consumers stand to benefit substantially, with industrial consumers expected to save ₹3.55 ($0.04)/kWh and commercial consumers ₹4.75 ($0.05)/kWh. The state extends exemptions on charges for all open access models, including third-party arrangements.

Chhattisgarh’s distribution companies (DISCOMs) have also been instrumental in promoting open access projects with their robust energy banking policy.

The energy banking policy includes the provision for annual energy banking, accompanied by a reduction in banking charges from 5% to 2%. Additionally, all open access consumers are now permitted to bank 100% of their surplus energy annually.

Collectively, these measures present an attractive and financially favorable opportunity for both renewable energy developers and consumers.

Operational solar projects in the state and those slated for commissioning in the coming quarters may find benefits in the favorable energy banking policy outlined in the amended regulations.

With the aim of streamlining calculations and improving transparency for intra-state open access participants, CSERC has imposed a 20% ceiling on the cross-subsidy surcharge applicable to open access power consumers, determined by the average power supply cost.

Effective from April 1, 2024, this modification offers stakeholders a more defined and predictable long-term outlook regarding their net landed energy costs.

For projects commissioned after December 2023, the amendments offer long-term visibility by determining cross-subsidy surcharges for twelve years from the project’s operation date.

Current Challenges

The introduction of the incentives is a response to the historical underutilization of open access markets for renewables in Chhattisgarh. But challenges still remain.

Verma highlighted the unique challenges of the state and why Chhattisgarh had remained a dormant open access market. He said many projects, especially captive ones, received approvals before 2019. However, the onset of the COVID-19 pandemic presented a new dynamic for Chhattisgarh, disrupting planned price structures and rendering them unviable.

“In response, developers adopted a ‘wait and watch’ approach, navigating the uncertainties brought about by the pandemic for the state’s developmental trajectory,” he said.

Nilesh Mahajan, Director at Roofsol Energy, however, noted that there is currently more momentum for rooftop solar among C&I consumers compared to open access. Mahajan noted that open access projects require a well-established infrastructure, without which developers are likely to encounter challenges in executing projects in this domain.

“We have seen an acceleration in recent years. Earlier, Chhattisgarh was not a good market. I believe the lack of infrastructure is still prominent. For instance, in other states like Maharashtra and Madhya Pradesh, open access is robust. Maharashtra has the highest generating capacity and caters to 20-25 GW of power. But this isn’t the case with Chhattisgarh. There are limitations in its generating capacity in order to ensure that the grid remains stable.”

Verma emphasized the importance of thorough preparation for the anticipated growth in renewables and that DISCOMs need to adapt to the higher percentage of renewables in the system. According to him, managing 1 GW of projects compared to managing a substation, which would support those 1 GW projects, presents a distinctly different challenge.

Rahul Mishra, Sr VP & Head C&I at BluPine Energy, said, “The recent amendments in Chhattisgarh’s electricity regulations will not significantly impact our solar projects; incentives were expected to be temporary triggers. We foresee continued scalability with the new policy. We believe that the projects in Chhattisgarh will continue to be economically viable, provided that land challenges are successfully managed and that banking provisions for 100% generation are adhered to. There may be short-term impacts, but stability is anticipated.”

Chanda spoke about another crucial roadblock stemming from the amendment. “While the initial policy lacked caps on transmission or wheeling charges, rendering the market highly attractive, the amendment introduced a 500 MW cap, causing policy uncertainty and adversely affecting investor confidence.”

Without the exemption of charges on captive and group captive green open access models would result in substantial savings for industrial consumers. While industrial consumers would save ₹3.55 ($0.04)/kWh with the exemption on charges, the savings would fall to ₹2.91 ($0.035)/kWh without the exemptions.

For commercial consumers, savings under the third-party model would fall from ₹4.75 ($0.05)/kWh with exemptions to ₹1.76 ($0.021)/kWh without. Under the captive and group captive model, without the exemption of charges, the savings would still be substantial at ₹4.11 ($0.049)/kWh.

Chanda said this underscores the need for clearer timelines in project planning. Despite concerns expressed in public hearings and applications to the government, the Commission’s decisions have not been favorable. Stakeholders are advocating for waivers for projects in advanced stages of development, particularly those that have procured materials outside the 500 MW allotted capacity.

According to Mercom sources, there is no further update if the deadline of December 27, 2023 will be extended or if the project capacity cap (500 MW) eligible for exemption will be increased.

While the policy has played a favorable element in boosting the open access capacity in the state, a more simplified and clearer approach to these policies would help the open access market grow further.