The landed cost of third-party solar open access projects of high-tension (HT) industrial consumers increased in 12 of the 15 states included in Mercom’s recently released Q3 2024 India Solar Open Access Market Report. The cost increase was primarily driven by a rise in power purchase agreement (PPA) prices.

In the third quarter (Q3) of the calendar year (CY) 2024, India added about 1.1 GW of solar open access capacity, down 36% quarter-over-quarter (QoQ) and 6.5% year-over-year (YoY).

Higher landed costs, coupled with challenges such as limited land availability, inadequate transmission infrastructure, and delays in obtaining grid connectivity, impacted installations during the quarter.

The landed costs were calculated by totaling the wheeling charge, additional surcharge, cross subsidy surcharge, and lowest PPA tariffs discovered in each state.

According to the report, the landed open access cost ranged between ₹4.3 (~$0.051)/kWh and ₹7.4 (~$0.087)/kWh. In Q3 2024, Chattisgarh offered the lowest costs, followed by Odisha and Uttar Pradesh. The highest landed cost was discovered in Maharashtra, followed by Tamil Nadu and Telangana.

Commercial and industrial (C&I) consumers’ demand for power at a cost lower than the electricity tariffs paid to distribution companies (DISCOMs) has been driving solar open access installations in the country.

States including Punjab, Karnataka, Andhra Pradesh, Chhattisgarh, Gujarat, Uttarakhand, Haryana, Kerala, and Odisha witnessed a QoQ increase in landed solar open access costs entirely due to the rise in PPA. Punjab witnessed only a marginal increase in landed costs despite a 6.2% increase in PPA tariff. Together, the states accounted for over 52% of the country’s cumulative installed solar open access capacity as of September 2024.

In Tamil Nadu and Telangana, the landed costs rose due to increased PPA tariffs and open access charges.

In Telangana, a 5.3% rise in the PPA tariff and the imposition of an additional surcharge that was previously exempt led to a QoQ increase in the state’s landed costs for third-party projects of HT industrial consumers.

In Uttar Pradesh, wheeling charges and cross-subsidy surcharges were up 14.8% and 58.1%, leading to a QoQ increase in the landed cost. As of September 2024, the state contributed over 20% to the country’s cumulative installed solar open access capacity.

Open access charges accounted for 27.4% of the landed solar open access cost of third-party projects by HT industrial consumers in Chhattisgarh. The state offered the lowest costs during the quarter.

In Maharashtra, the costs were the highest as the state levies the highest open access charges on C&I entities. In Q3, the open access charges comprised 51% of the state’s landed costs.

 

Cost savings compared to DISCOM tariffs under the third-party model were lower compared to those offered by captive and group captive projects due to the inclusion of additional charges and cross-subsidy surcharges in the landed costs of third-party projects. To enhance savings and encourage adoption of third-party open access projects, state commissions should consider reducing open access charges, particularly the surcharges.

Recently, Tamil Nadu, Telangana, and Uttarakhand revised their additional surcharges.

In October 2024, the Ministry of New and Renewable Energy (MNRE) clarified that the solar open access projects that had first applied for approvals before October 1, 2022, would be exempt from the mandatory requirement of sourcing modules enlisted under the Approved List of Models and Manufacturers. This would likely lower the landed costs and increase the attractiveness of the PPA tariff, boosting solar open access installations in the upcoming quarters.

The Q3 2024 India Solar Open Access Market Report is 59 pages long and covers state-wise open access charges, electricity tariffs, power purchase agreement tariffs, installed and pipeline project capacities, and policy updates, along with other critical information and data on the market.