The landed cost of open access power: what you really pay

An open access developer may quote an attractive tariff for renewable power. But that tariff is what the generator receives at its plant — not what the consumer pays for power delivered to its factory. The landed cost includes everything between the plant and the factory meter. Comparing landed cost with your grid tariff is the only fair way to judge whether open access saves money.

The building blocks

1. Generator tariff

The price paid to the generator under the PPA, at the plant or delivery point. See what is a PPA.

2. Transmission charges

For using the transmission network to carry power from the plant towards the consumer.

3. Wheeling charges

For using the distribution network to deliver power to the consumer.

4. Network losses

Some energy is lost in transmission and distribution. The consumer receives less energy than the plant injects, so the effective cost per unit received rises.

5. Cross-subsidy surcharge

A charge compensating the distribution company for loss of cross-subsidy when consumers source power elsewhere. Whether it applies depends on the arrangement and current rules.

6. Additional surcharge

A charge that may apply to compensate the distribution company for stranded costs, depending on current rules.

7. Banking charges

If surplus energy is banked for later use, banking charges may apply. See energy banking explained.

8. Scheduling and deviation charges

Charges related to forecasting and scheduling, and to deviations from schedule, where applicable.

9. Other charges

Application fees, metering costs, SLDC charges and other administrative costs.

Putting it together

Landed cost per unit = (all costs) ÷ (units actually received and used)

Comparing with the grid

The benchmark is the tariff you would otherwise pay to the distribution company for those units — specifically the energy charge, not fixed demand charges that continue regardless. See reading your industrial electricity bill.

Savings per unit = grid energy rate − landed cost

Why charges vary

Charges depend on:

• Voltage level of connection
• Location of plant and consumer
• Type of arrangement — third-party, captive, group captive
• Source — renewable or conventional
• Current regulations — national rules and state orders

Captive and group captive

Captive arrangements meeting applicable conditions have historically been exempt from cross-subsidy surcharge and additional surcharge. This can significantly lower landed cost — but only if captive conditions are met. See open access vs group captive.

Green energy open access

National rules on green energy open access introduced provisions intended to support renewable open access, including on surcharges and banking. State implementation varies. See green energy open access explained.

Testing scenarios

Because charges are set by regulators and change, test the landed cost under different scenarios:

• Base case — current charges
• Higher charges — increases in surcharges or network charges
• Banking changes — tighter banking rules
• Grid tariff changes — your benchmark tariff rising or falling

A project that saves money only under today's charges carries more risk than one that saves money across scenarios.

Change in law

How the PPA allocates changes in regulatory charges matters. If the consumer bears all changes, it carries regulatory risk. If shared or capped, risk is reduced.

Seasonal effects

Solar and wind generation vary by season, and so does the energy available to consume. Combined with banking rules, this affects how many units are actually used versus banked, lapsed or sold at lower value. Model landed cost month by month.

An illustrative structure

The figures below are illustrative only, to show the method:

1. Start with the generator tariff per unit at the plant
2. Add transmission and wheeling charges per unit
3. Adjust for losses (divide by the share of energy that arrives)
4. Add any applicable surcharges per unit
5. Add banking charges on the share of units banked
6. Add scheduling and admin costs spread over annual units
7. Compare the result with the grid energy rate

Common mistakes

• Comparing generator tariff directly with grid tariff
• Forgetting losses
• Using the average bill rate as the benchmark
• Assuming surcharge exemptions apply without checking conditions
• Not testing against regulatory changes

How we help

Through open access and group captive solar work with industrial consumers, we help build landed cost comparisons, test scenarios and coordinate off-site project development. Regulatory interpretation should be confirmed with the regulator, utilities and qualified advisers.