Today’s rising energy costs and sustainable goals are leading more Indian businesses to opt for alternative energy solutions. One of them is group captive PPA, which is a model that allows multiple people or organizations to jointly invest in a renewable energy project and benefit from cheaper, cleaner power without the need to own and operate an on-site plant.
However, how do people set up this power purchase agreement? Let’s learn about it step by step in this blog.
Understanding the Basics: What Is a Group Captive PPA?
In a Group Captive PPA, the consumer (or a group of consumers) owns at least 26 percent equity in the generating project and consumes 51 percent or more of the generated power. This type is particularly appealing in India, since there is no cross-subsidy and other surcharges on open access rules, and power is much cheaper than the discom tariff.
It is suitable to set up in manufacturing units, technology parks, and logistics firms, or even a cluster of a mixture of MSMEs that want to reduce cost and carbon footprint at the same time.
Steps to Establish a Group Captive PPA
Companies must follow the necessary steps to form a group captive PPA. Here is the list of these steps:
Assessing Your Company's Energy Needs
The first thing you have to do is to analyze the energy needs of your company. These involve analyzing your present level of energy consumption, the future energy requirements, as well as examining the extent to which renewable energy can meet those requirements. Energy needs need to be evaluated to make a successful Group Captive PPA.
Identify Suitable Partners and Aggregate Demand
A Group Captive PPA involves joint ownership; hence, you need to identify the other companies that are also interested in starting renewable energy consumption. How to find them? Look for businesses within the same industrial cluster or industrial park, companies that have similar energy demands and ESG goals, and lastly, firms that can commit to long-term power offtake (10–15 years).
Conduct a Feasibility & Load Analysis
Once you know who your partners are, you should conduct a comprehensive feasibility study and load analysis. This should include your total energy consumption, future load projections, and preferred type of renewable source (solar, wind, or hybrid), and to learn about state-specific policies and open access charges.
Form an SPV (Special Purpose Vehicle)
Now, this step is to establish a Special Purpose Vehicle (SPV) or to invest equity in an existing renewable energy project. According to Indian law, the consumer group should have a minimum of 26 percent equity ownership within the SPV. The major features of this step are:
- Writing down an explicit shareholder agreement
- Describing the way of distribution of equity and governance structure
- Creating adherence to the Electricity Act and open access regulations
Sign the PPA & Shareholder Agreements
Now, it is a step of the legal and contractual side of the group captive PPA. For this, you need two documents, a power purchase agreement (PPA) and a shareholder agreement. The PPA is between the SPV and the consumers to detail the duration, tariff, supply obligations, penalties, and termination clauses. On the other hand, a shareholder agreement lays out how the group of consumers will manage the SPV, vote on decisions, and handle disputes.
Apply for Open Access & Regulatory Approvals
This step involves interaction with local regulatory bodies such as the State Load Despatch Centre (SLDC), DISCOMs, etc. You’ll need to apply for a long-term or medium-term open access, coordinate with transmission/distribution licensees, secure banking and wheeling agreements if needed, and register for RECs (Renewable Energy Certificates) if applicable.
Project Commissioning & Power Supply Begins
After the approvals have been made and the project has been commissioned, the power will begin flowing to your company via the grid. The SPV will engage in ongoing tracking, scheduling, and billing, and will modify the energy credits in your DISCOM bills.
Take Charge of Your Energy Future!
Let me ask you a question: why did you start your own business or company when you could have easily done a 9 to 6 corporate job? If one of the reasons is for you to take control of your future, then group captive PPA is part of that. Take charge of your energy consumption and future with this renewable energy solution. You can contact Enernew, India’s best solar power developer, to further learn about it.