At the start of every financial year, DISCOMs revise grid tariffs with approval from regulators. It is usually a routine exercise involving a review of all operational costs and changes required in tariffs to sustain overall business. But this year, it seems that the DISCOMs have decided to tactically fight back against the growing corporate renewable market and its adverse impact on their finances. The new tariff orders include a series of measures such as reduced daytime tariffs, rebates for consumers switching back to grid, additional grid charges on renewable power and lower green tariff premium to protect their business.
Alteration in grid tariff structure
A common set of measures seen across multiple states includes adapting grid tariff structure in a manner that makes open access less attractive. Maharashtra, Bihar, Karnataka and Uttarakhand have increased fixed charges, while some others (Madhya Pradesh, Andhra Pradesh and Odisha) have either reduced daytime variable tariffs or offered rebates to consumers to switch back to the grid (see figure below). TOD tariffs are also changing with higher discounts during solar hours and vice versa as seen in Karnataka, which is proposing to offer a rebate of INR 0.75/ kWh between 10 AM-3 PM and charge a premium of INR 1.00-1.50/ kWh between 6-10 AM and 6-10 PM.
Maharashtra, Madhya Pradesh and Karnataka have offered tariff rebates of INR 0.75-2.00/ kWh to OA consumers to encourage higher grid consumption.
Figure: Measures to make OA less attractive
Source: BRIDGE TO INDIA research
Notes: Some measures announced by Karnataka are still in proposal stages. Charges are shown for HT industrial consumers connected at 33 kV level.
Higher grid charges for renewable power
DISCOMs are also levying higher grid charges on renewable power to make it less attractive. Like Tamil Nadu, Maharashtra, Madhya Pradesh and Gujarat have done in the past, Andhra Pradesh, Chhattisgarh and Telangana are proposing additional charges for OA projects. Karnataka has gone even further and proposed a charge of INR 3.01/ kWh.
More attractive green tariffs
The number of states offering green tariffs has gone up from three in 2021 to thirteen. As the figure shows, several states including Uttarakhand, Maharashtra and Odisha have reduced the premium to increase attractiveness of this route.
Increase in banking charges
Although more states are offering banking for renewable projects, banking charges have been revised sharply upwards from 2-5% to 8% in Telangana, Madhya Pradesh and Karnataka, and to 15% in Punjab.
State governments and DISCOMs have historically resisted OA renewable by simply withholding connectivity approvals. The route has been unavailable to most consumers in key states like Maharashtra, Gujarat, Andhra Pradesh, Rajasthan, Telangana, Haryana and Punjab all these years. But issuance of green OA rules by the Ministry of Power in 2022 has changed the modus operandi. There is pressure on the states to be more transparent and introduce renewable-friendly policies. Many of the laggard states including Madhya Pradesh, Haryana, Punjab, West Bengal and Telangana have agreed to implement green OA rules although the timeline remains uncertain.
As seen in recent tariff orders, DISCOMs have a lot of tools available to discourage OA renewable market. We believe that the recent measures are just a beginning. Over time, DISCOMs are expected to further increase fixed tariffs (while lowering variable tariffs), impose higher grid charges on OA power, restrict banking and resort to more extreme TOD tariffs.
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