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Nov 2016

Group Captive Scheme - Policy Overview

  Group captive power scheme - Boon for customers!


As per electricity act 2003 (EA 2003), consumers are allowed to install captive power plants.  Captive power today is a  significant source of power and has been playing an important role in the present power scenario which is presently affected by inadequate supply of grid power and high tariffs. There has been a major shift in usage pattern of captive power plants from back to back use to baseload use.

What is a Captive power plant? 

A captive power plant allows a consumer to generate power for self-use.  A solar captive (grid-connected) power plants helps to generate power for self consumption while staying on the public power grid. Sunlight incident on the solar panels is converted to DC power which is fed to the inverter. The inverter converts the incoming DC power into AC with suitable power quality which is then synced with the utility grid for self-use.It is best-suited for industrial and commercial establishments having peak consumption in daytime.

On 8th June, 2005, the Ministry of Power(MoP) empowered by the EA 2003- brought out a notification, releasing  a scheme called the group captive power scheme (GCPN) which involves a slight modification to the present captive power plant.


 Group captive power scheme (GCPN)

It is a unique structure which allows the developer(individual company having multiple locations / multiple companies together) to set up a power plant for collective use of many consumers. As per Section 9 of the Electricity Act 2003,

  1. Any captive generating plant in which the developerholds a minimum of 26% of the ownership and consumes not less than 51% of the aggregate generation on annual basis and;

  2. If the generating plant is set up by a registered cooperative society, the consumers collectively have to consume not less than 51% of the aggregate generation on annual basis

will qualify for the group captive scheme.

The developer can sell the remaining 49% of the power to the power user (consumer/group of consumers buying electricity from developer for nominal tariff )

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Also, as per section 38,39 and 40 of the EA 2003, the central transmission utility (CTU) and the state transmission utility (STU) have been instructed to provide non-discriminatory open access to developer for the use of transmission system for his/their use without any surcharge.

This provision enabling a captive power plant to be set up by a group of consumers is primarily aimed at allowing small and medium industries or other consumers that may not individually be in a position to set up plant of optimal size in a cost effective manner. Given below are the advantages one can expect from  installation of a group captive plant.

Advantages:

  1. Cheap power: The consumers will consume electricity at a cheaper rate than than the state tariffs.

  2. Exemption from cross subsidy charges: Consumers will be exempt from paying the cross subsidy charges.

  3. Tax benefit: Any profit making entity investing in solar captive power plant can write of (80+20)% of the plant cost in the first year of depreciation, resulting in lower taxable profits.

  4. Sale through RECs:  The consumers can also use the electricity generated through solar plant for sale through Renewable Energy Certificates in the open market. With this benefit, the net cash flow will include both the savings from the project and the revenue from the sale of RECs.

Given the advantages of this scheme, many industries have opted for the same, Brakes India being one of them. Brakes India Ltd, a part of the TVS group, formed a joint venture with Sun Edison for solar power. The said solar power plant has a capacity of 7.72 MW, which is installed and commissioned in Tamil Nadu. This system is built in accordance with the group captive scheme at Rs. 66 crore. The power will be supplied by Sun Edison to Brakes India at a rate lower than the state utilities. The developer will also receive the tax benefit due to accelerated depreciation in the first year of installation.

Kalpa Power assists its customers in implementing this group captive power plant and availing its benefits. To know more about this scheme, please email us at power@spanpump.com.


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