States with Favorable Energy Banking Policies See Growth in Open Access Solar

States with favorable energy banking policies witnessed considerable growth in open access solar installations in the calendar year (CY) 2021, as per the analysis published in Mercom India Research’s ‘Mercom India Solar Open Access Market Report Q4 & Annual 2021.’

The report noted that 1.2 GW of new solar open access capacity was installed in 2021, marking year-over-year growth of 222%.

Other factors contributing to this growth were low landing costs and smoother approval processes of distribution companies for setting up captive and group captive projects.

As of December 2021, the cumulative installed solar capacity in the open access market crossed 5 GW.


Favorable energy banking policy in the states with the most open access installations, provided generators with the flexibility of depositing excess power in the grid for later use, which boosted growth.

Banking of energy or power is when the generator supplies power to the grid, not to sell to either the third party or a licensee but to withdraw it from the grid for its use later when needed.

Speaking to Mercom, a top executive from a leading open access developer said, “Energy banking is the most important factor for the growth of open access solar. Many states like Uttar Pradesh, Maharashtra, Madhya Pradesh, and Chhattisgarh have very solid energy banking policies. Favorable energy banking policies in these states have provided the customers with a sense of energy security. This is a major reason for the growth in open access in 2021.”

“Also, open access installation is driven by consumers who want to avail more affordable energy in comparison to power brought from the commercial and industrial tariff. You can clearly see that in states where landed open access cost is lower, there will be higher open access installations— like in the case of Uttar Pradesh.”

Another developer Mercom spoke to said, “The process of allotting connectivity through a transparent and easy process has attracted many developers to set up open access projects in Uttar Pradesh, as land and connectivity are the major requirements for any project to start with. Further, the waiver on transmission and wheeling charges also imparts good viability in terms of offering savings to clients.”

States with Favorable Energy Banking Policies

In 2021, Uttar Pradesh witnessed the most open access solar installations, followed by Tamil Nadu, Maharashtra, Madhya Pradesh, and Karnataka. The top five states accounted for 80% of total installations during the year.

Uttar Pradesh allows annual energy settlement with a banking charge of 6%, allowing 100% of the energy to be banked for captive customers. Withdrawal of banked power is allowed only per the time-of-day (TOD) system, i.e., withdrawal of power in the peak or off-peak hours will not be more than the power banked in that respective time slot.

On the other hand, monthly energy settlement is the norm in Maharashtra with a banking charge of 2%, allowing 100% of the energy to be banked for captive customers and third-party sales. The regulation allows energy to be banked during peak TOD, and it may be drawn during off-peak TOD, but the energy banked during off-peak TOD may not be drawn during peak TOD.

In Madhya Pradesh, the energy settlement is annual with a banking charge of 5%, allowing 100% of the energy to be banked for captive customers and third-party sales.

One of the other top-ranking states, Karnataka, implements its energy settlement annually with a banking charge of 2%, allowing 100% of the energy to be banked for captive customers and third-party sales. The state has no restrictions on energy that is banked. However, in the Draft Karnataka Renewable Energy Policy 2021, the Karnataka government has proposed discontinuing the banking facility. The open access installations would be adversely impacted if banking is curtailed.

The Karnataka Electricity Regulatory Commission, however, in a recent ruling, had allowed the carry forward of banked and unutilized renewable energy until August 2022.

Energy banking regulations have been used by states to either curb or boost open access project development, making it a significant factor impacting the cumulative installations.

“Karnataka has always been an attractive state for renewable developers. Captive plants are mostly being installed here. Captive consumers avail good savings in this state. Even after ambiguity in terms of open access charges applicability, banking facility, and captive norms, developers are attracted to this state due to large potential consumers and viability of captive plants,” a developer added.

Open access can be a significant contributor to India’s pursuit of the adding 280 GW of solar capacity by 2030, with banking energy a key factor.

According to Mercom India’s analysis, the low landed cost for open access was identified as one of the other primary factors contributing to the growth of open access installations across India.

Mercom’s India Solar Open Access Market Report Q4 and Annual 2021 also gives insights into the short-term transactions, such as the day-ahead market, bilateral contracts, real-time market, and the green-term ahead market within the open access space.