The renewable energy landscape in India presents a complex mosaic where each state faces unique challenges and opportunities. Two states that highlight this contrast are Telangana and Andhra Pradesh. While Andhra Pradesh shows renewed optimism under a favorable political shift, Telangana’s renewable energy sector continues to grapple with regulatory hurdles and restrictive policies, particularly in the open access market.

Telangana: An Outlier in the Open Access Market

According to a developer, Telangana stands out as an “outlier” among Indian states due to its persistent resistance to the open access market, especially for renewables. “After 2014, no new open access projects were allowed to come up in the state.”

Before the state’s bifurcation, about 180 MW of open access capacity had been added in Andhra Pradesh, but since then, Telangana’s policy environment has become hostile to open access.

While enabling legislation existed to permit capacity permissions for open access projects, the implementation fell drastically short. “People were applying for feasibility, but permissions were not granted. The applications just sat there with no response,” the source said. Those who pursued legal action were sometimes granted permissions, but overall, no additional capacity has been added for nearly a decade.

Despite the growth of solar open access installations nationwide, Telangana’s regulatory environment has hindered progress. Developers in the state report significant issues, from delayed long-term open access (LTOA) renewals taking months rather than the mandated 30 days, to non-standardized power quality tests that lack regulatory guidance or certified agencies

Further obstacles include DISCOMs issuing de-energization notices for failing to meet technical standards despite utility responsibilities for grid harmonics and power quality. Partial payments for unutilized banked energy also burden developers, contradicting the TSERC regulation that mandates 100% compensation at the Average Pooled Power Purchase Cost. While neighboring states have adopted supportive policies, Telangana’s challenges underscore its unique barriers to renewable energy expansion.

Telangana’s regulatory framework further worsened conditions for existing open access projects. Developers who established projects before the policy clampdown were only granted medium-term open access permissions, valid for two years, as opposed to long-term access. Even these medium-term permits were a source of constant hurdles, with renewals sometimes taking six to nine months. “It was a very hostile regulatory environment,” said another industry source.

Adding to the financial strain was the state’s high cross-subsidy surcharges, among the highest in the country, reaching up to ₹1.42 (~$0.017)/kWh. “This, coupled with additional surcharges imposed two years ago, has made the sector financially unviable,” the expert noted. As a result, many developers ended up receiving only ₹2.2 (~$0.026)/kWh after all deductions, leaving the industry in distress.

The bleak picture is underscored by the fact that Telangana didn’t witness any solar open access capacity additions in Q2 2024, according to the Q2 2024 Mercom India Solar Open Access Market Report. In the previous quarter, only 1 MW of solar open access capacity was added.

As of June 2024, Telangana had the tenth-highest cumulative installed solar open access capacity, with 329.5 MW, accounting for just 2% of the country’s total.

Despite the change in government in 2023, not much has changed. While there has been talk of new solar and wind policies, these are yet to materialize.

Andhra Pradesh: A Renewed Hope

In contrast to Telangana, Andhra Pradesh’s renewable energy journey has been more dynamic, albeit with its share of challenges. Historically, under the leadership of former Chief Minister Chandrababu Naidu, the undivided Andhra Pradesh was among the frontrunners in renewable energy development.

“Anantapur, Kurnool, and Kadapa in the Rayalaseema region are where most solar and wind projects were installed. A lot of investment flowed into these arid, backward areas, which have rich solar and wind resources,” said the developer.

However, the sector faced a setback when the state was bifurcated. The government attempted to renegotiate Power Purchase Agreements (PPAs), stating that the tariffs agreed upon were too high. “The tariffs were around ₹4.7 (~$0.056)/kWh for wind and slightly lower for solar, but the government wanted to bring them down to ₹3.2 (~$0.038)/kWh,” the expert explained. This move led to legal battles, with the industry suffering for nearly three years. Many projects were stalled as investors hesitated to commit amidst the policy uncertainty.

Andhra Pradesh has shown signs of bouncing back in recent months. Towards the end of its term, the former government began encouraging solar energy, and now, with new policies, there is a renewed sense of optimism in the sector.

Andhra Pradesh holds significant potential for open access due to a considerable number of energy-intensive industries.

The state’s open access market has also shown impressive growth. In Q2 2024, Andhra Pradesh installed 69.9 MW of solar open access capacity, a staggering 52,618.6% year-on-year growth from a mere 0.13 MW in Q2 2023.

Additionally, in 1H 2024, the state installed 452.7 MW of solar open access capacity, reflecting an impressive 341,161% increase from the same period in 2023, which had only 0.13 MW of additions.

As of June 2024, Andhra Pradesh held the seventh-highest cumulative installed solar open access capacity, with 1,023.4 MW, representing 6.3% of the country’s total.

Another developer shared that there is active interest in Andhra Pradesh’s open access market, with companies exploring inter-state solutions. “We are proposing interstate transmission solutions to tap into the potential of other states where we already have wind and solar power projects,” said the source. He highlighted that Andhra Pradesh’s favorable infrastructure has positioned the state to offer better connectivity and a more conducive market for open access power.

“Connectivity is being offered, and new capacity proposals are being approved. The sector is looking up,” the expert remarked.

Open access accounted for 20.8% of Andhra’s cumulative installed large-scale solar capacity as of June 2024. Wind-solar hybrid projects accounted for 37.2% of the solar open access installations.

Both Andhra Pradesh and Telangana provide a snapshot of the divergent paths that Indian states are taking toward renewable energy growth. Telangana’s lack of progress and regulatory indifference have stifled its renewable ambitions, while Andhra Pradesh’s renewable energy sector is seeing a resurgence, driven by favorable policies and renewed political will.