Electricity is one of the inventions that truly transformed the world. The discovery of electricity has a profound impact on all aspect of human life. Today, it is difficult to imagine the world without electricity. The access to reliable and consistent electricity is a major factor that separates the developing and not so developed countries.
The Indian government understands the importance of electricity especially as it pivots the economy towards the manufacturing-led growth. India follows a mixed model of economy which entails a combination of capitalist and socialist policies. Electricity, being a public good, is a regulated sector in India. The government policy aims at meeting the power requirement of the country and keeping the power prices affordable for the masses. Therefore, the power procurement policies follow a market driven approach while the policies of power pricing for end customers follow socialist approach. This structure results in subsidisation of power prices for the financially weaker and marginalized section of the society. The revenue gap due to such subsidies is usually covered through government grants and imposition of higher tariff on commercial and industrial (C&I) customers.
In addition to the inherently higher power cost compared to other customers, the power cost burden can increase drastically due to unfavorable weather events such as heat waves. Off late, the extreme climate events (hotter summers and freezing winters) have increased worldwide, and India has been witnessing the severity of these events for the past couple of years. Such events increase overall power consumption and the utilities need to purchase costly power in the short term market to address the temporary demand-supply mismatch.
The Fuel Adjustment Charges (FAC) is a mechanism through which such additional burden gets passed on to the customers. FAC is increased to accommodate the higher fuel costs. The power costs of the commercial and industrial (C&I) customers are prone to inflationary pressure due to the sudden demand shocks and supply constraints. In addition to the structural challenges of the power sector and climatic risks, the electricity prices of the C&I customers also vary based on the time of consumption. C&I customers consuming electricity in the morning and evening peak time end up paying premium over the normal tariff. Therefore, C&I customers need to develop a cohesive strategy aimed at lowering the power costs to remain competitive in the market.
India is blessed with significant solar irradiance of 4-7 kWh/sq. meter/day. Most parts of India have 300 – 330 sunny days in a year, which is equivalent to over 5000 trillion kWh per year – more than India’s total energy consumption per year. Businesses can develop the resilience against the power cost fluctuations through adoption of solar power. Depending on the consumption pattern and space availability, C&I customers can explore multiple solutions such as rooftop solar, open access solar and solar + battery storage. Further, businesses can opt for comprehensive solutions from independent power producers (IPPs) thereby capitalising on their domain expertise. C&I consumers can fix their power procurement price for 20-25 years through long term PPAs with IPP, thereby hedging against the power price inflation. This also results in efficient allocation of capital as the upfront capital requirement is very minimal and businesses can focus their resources on core operations.
The government on its part has been supportive of increasing the adoption of renewable energy sources. The benefits of solar power to the businesses are not limited to savings in power costs but also includes incentives from government policies, and brand building through promoting the sustainability. Export oriented enterprises can also build capacities in solar power to market products in countries which implement carbon taxes. Apart from the commercial incentives, harnessing solar power will help businesses become responsible corporate citizen and create awareness about the climate change. The increase in solar energy adoption will brighten the prospects of businesses and shall also help to realise the dream of energy self-sufficiency for Viksit Bharat.
