India's renewable energy target hinges on open access to industries

States must shift open access from a reluctant concession to a core strategy, as lower power costs for industries are key to the wider energy transition

India’s target of having 500 GW of installed renewable energy (RE) capacity by 2030 depends on establishing a strong value proposition through open access for commercial and industrial (C&I) consumers. As the cost of round-the-clock (RTC) renewable generation declines, states will have to progressively lower open-access charges to encourage RE adoption in industry. The advantages of reduced power costs for businesses shall outweigh any potential strain on power distribution companies (discoms) resulting from these charge reductions. 

A quick assessment of what is in place now shows that annual installations must accelerate to around 55 GW to reach the 2030 goal, compared to just 58 GW added in three years. This monumental scaling requires dismantling barriers that have slowed adoption despite falling costs and growing industrial demand for green energy. Long-term power purchase agreements (PPAs) for firm and dispatchable RE (FDRE) and solar-plus-storage projects have gained traction in the past six months, but several interstate transmission projects are experiencing delays and may threaten timely commissioning of capacities planned. 

At the same time, non-solar hour deficits may worsen as expansion of coal-based thermal capacities trail demand. To address this issue in the near term, discoms will have to rely on increased short-term power purchase arrangements. That will include buying electricity on power exchanges and entering into bilateral agreements through power traders, especially for their evening-hour requirements. However, these procurements are likely to be costly as prices during these times are expected to remain high, averaging between ₹6 and ₹ 8 per unit. 

The economic case for RE is compelling. The average power procurement cost (APPC) for six of the top eight power-consuming states was ₹5.5/unit or more in FY24. In comparison, the FDRE tariffs ranged between ₹4.5 and ₹5 per unit, or 10-20 per cent lower. The tariffs are attractive compared to new coal plants, whose variable costs are subject to escalations and range ₹6-7 per unit. 

Given the challenges in ramping up interstate transmission capacities, promoting intrastate capacities by lowering cross-subsidy and additional surcharge can be win-win for both states and C&I consumers. States will attract more industries due to lower power costs and the latter will benefit from lower operating costs and better margins. The C&I segment accounts for half of the power demand by various units but only 25 per cent of its need was served by captive and open-access routes (the remaining was from utilities).

 

It is this captive and open-access route that has the potential to contribute nearly 90-100 GW of RE capacities by 2030 with industry-friendly policies. The 2022 reduction in open-access eligibility from 1 MW to 100 kW theoretically expanded opportunities for smaller enterprises, particularly MSMEs. In practice, however, high open-access charges continue to limit adoption. Discoms are reluctant to reduce these charges as they seek to protect their cash flows from a potential flight of high-value industrial consumers seeking open access as well as to cover fixed charges paid to generators from whom they procure power.

 

Meanwhile, generation costs for RE RTC with up to 75-80 per cent capacity factors have plummeted to ₹4.5 per unit in two years. This was driven by capital costs in solar power declining from ₹4.90 crore per MW to ₹4.60 crore per MW and Battery Energy Storage Solutions reducing from ₹200 per kWh to ₹120 per kWh.

 

The so-called group captive RE consumers pay state transmission charges and bear costs on account of transmission losses, both at the interstate and intrastate levels. From July 2025, they are required to pay interstate transmission charges in a graded manner. Hence, for C&I consumers in Maharashtra, even with these charges, the cost of electricity of ₹6.05 per unit with 75 per cent RTC compares favourably with ₹8.36 per unit of industrial tariffs (excluding demand charges) from the grid. This economic reality will inevitably drive large industrial consumers toward captive renewable capacities and especially accelerate adoption for those with sustainability commitments.

 

Smaller industrial consumers will not have the financial strength to invest the required 26 per cent equity to qualify as group captive. Open access cross-subsidy and additional surcharge of nearly ₹3 per unit then becomes applicable. With these charges added, the total costs for an industrial unit become ₹0.7 per unit higher compared to industrial tariffs. Given the downward trajectory of RE RTC costs, time is ripe for states to ensure that such charges come down for C&I consumers for capacities set up in the state in a phased manner and RE economics in terms of per unit price become even more compelling.

 

As many as 22 states issued green energy open access (GEOA) in 2024. Gujarat is a pioneer in formulating an attractive open-access regime through GEOA regulations that ensure additional surcharge reduces progressively every year and gets eliminated in four years from the date of grant of open access to the open access consumer.

 

However, all discoms are not in a position to do this. The most recent attempt to address discom health is a Group of Ministers (GoM) constituted in January 2025. Addressing the core problem of aggregate technical and commercial losses is essential as large industrial consumers will pay far less for RE through captive routes to meet their energy needs as well as green commitments. Hence, discoms risk losing their most valuable consumers which would make their problems worse.

 

The recent meeting of the GoM decided that power tariffs need to be inflation-indexed and cost-reflective with a reasonable return on equity (RoE) to steer the distribution sector on the path of financial viability. While measures such as smart metering and strengthening of transmission and distribution infrastructure would help, a sustainable reduction in average power procurement costs of discoms and cost reflective tariffs is key to achieving the desired viability. This will also improve industrial competitiveness through lower operating costs in the face of increasing global tariffs.

 

For India to achieve its 500 GW RE target by 2030, open access must evolve from a reluctantly granted concession to a cornerstone of energy strategy. The economic logic is compelling, the technology is ready, and industrial consumers are eager.

 

States with substantial renewable potential and strong industrial bases — Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu — must lead this transformation. By signing PPAs for RE and systematically reducing cross-subsidies, these states can demonstrate that the transition to renewables strengthens rather than weakens the power sector's financial health. 

The writers are group head and senior executive vice-president at HDFC Bank