Group Captive – Fense Solar

GROUP CAPTIVE

The “Group Captive” model is based on the Electricity Act, 2003. As per the Electricity Act, 2003, a Group Captive power plant, unlike an individual captive power plants, is a structure where a developer sets up a power plant for collective use of many industrial consumers who must have at least 26 per cent of the equity in the plant and must consume at least 51 per cent of the electricity produced. 

 

Although the term “Group Captive” was introduced in the Electricity Rules, 2005, this scheme seems to be catching the trend off late in India. 

 

The “Group Captive” scheme allows for a structure for supply of power to a group of consumers, treating them as captive consumers, if the following conditions are met: 

1) Not less than 26% of the equity is held by captive consumers. 

2)Not less than 51% of the aggregate electricity generated in such plant, determined on an annual basis, is used for captive consumption. 

 

Working Model for Group Captive power scheme: 

 

Consider 2 companies, Company 1 and Company 2. Both decide to bring down their electricity costs. Collectively they set up a Solar Power Plant with 26% equity and decide to use about 51% of energy produced. Then they decide to sell the remaining 49% power to Companies 5, 6 and 7. This makes the whole group part of the group captive power scheme.Typically, Group Captive power projects must operate within the ambit of the “Open Access” mechanism. “Open Access” allows large power consumers (typically with a connected load of 1 MW and above) to buy power directly from the open market.  

 

Advantages of Group Captive scheme: 

 

1] Cheaper price: Industries and Commercial establishments tend to have a higher tariff which directly affects their profits. A Group Captive scheme helps reduce their power costs considerably. Besides getting regular, reliable and cheap power, the transmission and distribution losses also come down through group captive power plants because the power is produced locally and consumed locally. 

 

2] Cross subsidy: By section 42 of the Electricity Act, 2003 the consumers of captive power scheme are exempt from paying cross subsidy charges. The same is applicable for Group Captive consumers. 

 

3] Power Cuts: In case of a power cut, industrial consumers face heavy productivity losses leading to financial losses. Group captive scheme, circumvents this frustrating problem entirely. 

 

4] Solar: This is the star of group captive scheme thanks to REC. More on this is mentioned below. 

 

The group captive scheme in solar projects provides additional advantage, as the consumers can use the electricity generated through solar plant and are eligible to sell the REC certificates in the open market. This makes a solar project more attractive as the net cash flow includes the revenue from the REC's as well and avoid the expensive electricity purchases from the state utilities. 

 

FENSE Solar typically selects a potential industrial or commercial cluster and then tries to formulate an agreement that is suitable to multiple power consumers and the investors. Based on this approach we help set up a large solar project that caters to the long-term power requirements of the customers. 

 

To know more about the “Group Captive scheme”, please send us details of your inquiry. 

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