Captive power plants (CPPs) are established alternative to the national grid for domestic industries looking to optimise costs and ensure continuous supply.
Between fiscals 2019 and 2023, while India’s electricity requirement grew by 15% from 1,581 terrawatt hours (TWh) to 1,824 TWh, consumption via CPPs rose faster at 25% to 318 TWh.
Between fiscals 2019 and 2023, though, installed captive power capacity increased a modest 4% to 78 GW. A big reason for the poor show by captive power projects is policy ambiguity and stringent regulations. Here are two cases in point:
- Gujarat had imposed 100% ownership requirement, which conflicted with Electricity Rules, 2005. It was later aligned with Electricity Rules in 2023
- Haryana had restricted banking facilities for projects with less than 100% consumer ownership, but this was overturned by the state regulator in 2022 and aligned with Electricity Rules
Within this space, renewable energy (RE; comprising wind and solar) has made notable progress, with its share more than doubling to 8.9 TWh in fiscal 2023 from 3.9 TWh in fiscal 2019. Still, it accounts for only 4% of the total captive generation.
A large part of the limited uptake could be because of low average capacity utilisation factor of solar and wind in captive generation at only ~12% and ~18%, respectively, in fiscal 2023. These low numbers indicate the need for repowering policies to promote new technologies with enhanced output.
Also, captive power generation is concentrated only in 10 states, with RE’s contribution at 5%, on average, in fiscal 2023. At the state level, Tamil Nadu led in captive RE generation with a 25% share, followed by Rajasthan (7%) and Karnataka (6%).
Figure: 10 states accounted for 87% of captive generation in fiscal 2023
Source: Central Electricity Authority (CEA) Electricity Review, Bridge to India – CRISIL MI&A Research
Note: The CEA report covered 8,408 industries under the captive category in fiscal 2023. The above data may not include the full captive capacity.
CPPs are mainly set up by energy-intensive industries such as iron and steel, aluminium, cement, sugar, mineral, oil and petroleum, chemicals and textiles. Among these, aluminium, mineral oil and petroleum industries have been able to meet up to 91% of their requirement from captive generation, while the sugar industry generated 1.6 times its requirement. Iron and steel, cement, chemicals and textiles have been able to meet 71%, 61%, 49% and 26% of their power requirements captively, respectively.
Figure: Captive capacity increased 4%, while generation dipped 1%
Source: CEA Electricity Review, Bridge to India – CRISIL MI&A Research
Note: In fiscal 2019, CEA considered projects above 1 MW under captive, whereas in fiscal 2023, it considered projects above 0.5 MW as captive. The above data may not include full captive capacity.
Policy stimulus in the form of standardised structure for captive and group captive generation can boost the expansion of captive projects. The market is going to further mature with hybrid RE solutions in view of improved generation.
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