Open access vs group captive: how industries buy off-site solar

Many factories and commercial facilities in Tamil Nadu want more renewable power than their rooftops can provide. The answer is often off-site solar (or wind, or hybrid) — power generated at a plant elsewhere and delivered through the grid. Two of the main routes are third-party open access and group captive. They can look similar from the factory's side, but they differ in ownership, obligations and risk.

The common idea

In both routes:

1. A renewable plant is built on land away from the consumer's premises
2. The plant injects power into the grid
3. The consumer's account with the distribution company is credited for that power, subject to applicable charges and rules
4. The consumer reduces how much power it buys from the distribution company at its usual tariff

What differs is the relationship between the consumer and the plant.

Third-party open access

The consumer buys power from a generator — an independent power producer — under a power purchase agreement. The consumer doesn't own any part of the plant.

Features:

• Simple ownership structure for the consumer
• Price set in the power purchase agreement. See what is a PPA.
• Consumer pays applicable open access charges and surcharges
• Generator bears plant performance risk, within contract terms

Group captive

A captive plant is one set up primarily for the owner's own use. In a group captive arrangement, several consumers jointly hold equity in a special purpose company that owns the plant, and consume its power.

Under the Electricity Rules, captive status has historically depended on captive users holding at least a minimum proportion of ownership and consuming at least a minimum proportion of the plant's generation, verified annually. The specific thresholds, how they are computed and the consequences of failing them should be checked in the current rules and with legal advisers.

Features:

• Consumer invests equity in the plant company
• Captive consumption may be exempt from some surcharges that apply to third-party open access, depending on current rules
• Consumer takes on compliance obligations to maintain captive status
• Contract structures combine share agreements and power supply agreements

Comparing the two

Charges that matter

The landed cost of open access power includes more than the generator's tariff. Depending on current regulations, it can include:

• Transmission and wheeling charges
• Cross-subsidy surcharge
• Additional surcharge
• Banking charges
• Scheduling and deviation charges
• Losses in the network

Some of these may be reduced or waived for certain renewable or captive arrangements, depending on current national and state rules. See landed cost of open access power.

Green energy open access

National rules on green energy open access aimed to make it easier for consumers to buy renewable power — including lower eligibility thresholds and streamlined procedures. Implementation depends on state regulations. Check the current position with the Tamil Nadu Electricity Regulatory Commission and the distribution company. See green energy open access explained.

Banking

Banking lets surplus renewable energy be credited and used at another time, subject to rules and charges. Banking terms differ between states and change over time, and can strongly affect the value of off-site renewables. See energy banking explained.

Choosing between them

Consider:

• Investment appetite — can you invest equity, or do you prefer pure offtake?
• Consumption stability — can you reliably meet captive consumption conditions?
• Contract length — are you comfortable with a long-term commitment?
• Multiple sites — do you want to supply several facilities? See group captive for multiple facilities.
• Regulatory risk — how would rule changes affect each option?
• Sustainability goals — do both routes support your reporting needs? See renewable power and sustainability reporting.

Questions to ask a developer

• What is the tariff, and how does it change over the term?
• Which charges are included, and which do we pay?
• How is generation shortfall handled?
• For group captive: what equity is required, and how is captive status monitored?
• What happens if regulations change?
• What are the exit terms?

Common mistakes

• Comparing generator tariffs instead of landed cost
• Joining group captive without understanding compliance obligations
• Ignoring banking rules and their effect on value
• Committing to volumes that don't match future consumption
• Assuming today's charges and exemptions will stay the same

How we help

Through our open access and group captive solar work with industrial consumers, we help compare options, coordinate land and project development for off-site plants, and work with EPC and legal partners on structuring. Regulatory and legal advice comes from qualified specialists.