May 2023

Commercial and industrial (C&I) consumers depend heavily on captive power to meet their requirement of reliable and affordable power supply. India has an installed captive generation capacity of around 83 GW as of March 2022. This has been increasing steadily and grew at a compound annual growth rate of 7.7 per cent between March 2012 and March 2022. Coal-based capacity dominates the existing captive capacity, accounting for a share of nearly 60 per cent. How­ever, the majority of the large coal-based captive plants were established many years ago, while the focus now is almost entirely on renewable energy options. C&I consumers with captive coal capacities too are diversifying into renewables rapidly.

C&I consumers are increasingly embracing renewable energy options to benefit from the falling cost of renewable power (led by declining solar panel costs) as well as to decarbonise their operations and meet the net zero emission targets. Nota­bly, the demand for hybrid projects providing round-the-clock power is growing, as against plain vanilla solar and wind projects. Large industries are also setting up renewable-based captive power plants to meet their RPO obligations, besides fulfilling their baseload requirement. Notably, the introduction of the Green Energy Open Access Rules, 2022 provides relief to captive open access consumers that have faced challenges in developing captive renewable energy projects due to discoms’ refusal to grant open access approvals on arbitrary grounds.

The group captive model is becoming increasingly popular among consumers, especially with the withdrawal of open access waivers for new third-party power purchase agreements across various states, unlike group captive projects that continue to enjoy a waiver of cross-subsidy surcharge and additional surcharge.

India’s burgeoning captive capacity based on renewables is expected to continue growing, especially with the rising attractiveness of the group captive model, economic and industrial growth and the country’s sustainability goals. Power Line’s Special Section on captive power in India takes a look at the key trends and recent developments in the captive power market, the key issues and challenges facing the segment as well as the future outlook.