Challenges of implementing Open Access (OA) in India

Open Access in the Indian power sector refers to the ability of customers to select the power manufacturer and distributor to purchase from. If implemented widely, it will allow unrestricted access and end the monopoly of discoms in power distribution to heavy load customers.

Open Access helps green energy manufacturers like solar power companies to transmit power from their solar parks to load centers. A customer with a bulk load can access cheap, reliable green energy from either solar farms under the open access, or from its own rooftop solar installation easily. 

High tariffs & charges

According to a recent study by CRISIL, at a state level, the main bottleneck is the fear of state regulators losing out on cross – subsidy charges from high tariff paying C&I customers to the discoms. In addition to this, changes in banking period and additional surcharges currently plague the OA system. State level players have an instrumental role in determining the success of the open access system, and hence the state government along with SERCs and DISCOMs must ensure the implementation of the draft rules both in letter and action. 

Operators under open access have to incur various charges for using the grid. These charges can differ from state to state, and those states with a stable grid and favorable regulatory regime offer better prices. In case of solar power, the state-wise open access charges can vary from as low as INR 0.2/KWh in Andhra Pradesh to >INR 1.5/KWh in Uttarakhand. A large section of companies under the open access route in India are situated in the states of Madhya Pradesh, Andhra Pradesh, Karnataka, and Chhattisgarh at the moment.

Way forward to a solution

According to the proposed amendments to the Electricity Act 2003, any consumer having a connected load of 100 kW and above can get open access. Thus, industrial and commercial consumers like office complexes, hotels, hospitals, shopping malls and other large establishments can get open access, and other consumers can purchase green energy through Discoms. Successful implementation of this rule will be possible only when Discoms realize the compensation payable to them through cross subsidy charges reflects their real losses. 

OA Framework

In order to have open access implemented effectively, first we need to understand the OA framework. In its current state the proposed amendments in the Electricity Act needs to be thoroughly observed by industry stakeholders and mulled upon, for the best possible outcomes.

To create a supportive regulatory environment for open access to really flourish and promote consumption of green, clean power from renewable energy manufacturers, state electricity boards and regulatory authorities have to come together to enable better grid stability and make long term open access projects viable. 

Ensuring the success of renewable energy 

Currently, renewable energy projects have a lifetime of 25 years. The draft proposal states that the cross-subsidy surcharge levied by states should not be increased by more than 50 per cent for a 12-year period from the date of project commissioning. It also prevents any additional surcharge from being levied on these projects. Ensuring predictability on open access charges, thereby improving the cash flows of developers will facilitate more such projects by renewable energy companies who are at the forefront of making India a leading green energy producer, and ease the challenges of power trading in India.