All over the world, countries are realising the transformative power of solar energy and are turning to renewable energy with ambitious goals and global sustainability goals of achieving net zero emissions. With India's mission of expanding its renewable energy installed capacity to 500 GW by 2030, Solar Group Captive PPA is gaining traction. This model provides a great strategic benefit to consumers with high power consumption, especially businesses looking to achieve a balance between profitability and sustainability. 

For business owners who are looking to understand how to align their operational costs with sustainability objectives, the Group Captive PPA offers a practical solution. 

What is Solar Group Captive PPA?

Before getting into the advantages of the model, let's understand what exactly the group captive model is. A Group Captive PPA model is essentially a Power Purchase Agreement, a renewable energy procurement model between a group of companies. To become eligible for the model, certain requirements need to be met. These include the consumers involved in this model must hold at least 26% equity in the project and consume at least 51% of the generated power. This model is particularly more compatible with C&I customers as it allows them to lower energy tariffs and gain energy independence from rising electricity costs.  

Unlike third-party PPAs and open access, these captive structures allow the consumers involved to take partial ownership. Ultimately, this not only provides energy security but also offers many other benefits that include exemption from cross-subsidy and additional surcharge costs, making it more economically feasible over the long term.   

Why Businesses Are Adopting This Model

One of the major benefits of Solar Group Captive PPA is cost predictability. Energy costs are one of the major expenses for businesses and fluctuations in grid tariffs can prove to have a major negative impact on planning and budgeting. With a group captive model, businesses can forecast energy costs for the long term, often at rates lower than prevailing utility tariffs.

Holding shares in the generation asset gives companies an influence over how energy is distributed. This means getting a clearer picture of how much energy is produced, maintaining open operations and confirming that the process is friendly to the environment. The value of these factors is rising for companies as ESG compliance becomes more important.

In terms of the environment, this system reduces dependency on fossil fuels and requires no costly on-site equipment. This is a great choice for companies unable to host rooftop solar systems but still wish to switch to cleaner energy sources.

How Solar Fits into the Group Captive Model

In the case of solar Group Captive PPA arrangements, solar energy projects are set up under a shared ownership structure, typically in locations where land and solar irradiance are optimal. The company or group of companies that provides the funds for the project will have their ownership and use of resources proportionate to what they invest.

Solar systems are low-maintenance, customisable to varied requirements, and offer long-term performance. After they are set up, solar plants can produce power during the day with little need for continuous maintenance. If a group captive facility is employed, the financial approach of the PPA can potentially save your business a lot of money over the entire duration of the contract.

Regulatory Landscape and Financial Considerations

In India, group captive arrangements are endorsed by regulations since they help increase the use of renewable sources of energy which is a national priority. Still, there are many complexities in meeting the regulations for creating a project, deciding on equity arrangements and managing energy details. Because of this, most businesses go for turnkey developers or advisors to help with the initial structure.

Financially, the capital investment in a Group Captive PPA is typically structured through special purpose vehicles (SPVs), and the cost is recovered via lower energy bills over time. Further benefits such as tax incentives and depreciation benefits can increase the return on investment for the parties involved. 

Is It the Right Fit for Your Business?

Various variables such as the type of energy involved, risk tolerance, budget and future sustainability plans, influence the choice of energy procurement strategy. A Group Captive PPA is particularly suitable for businesses with significant energy requirements and a willingness to invest in long-term savings through clean energy ownership.

At the same time, it is important for businesses to check if they are ready to take on the financial and operational responsibilities of these agreements. It demands time and resources and for businesses to change their operating practices to be more sustainable.

Enernew: Your Trusted Partner To Create A Sustainable Future

At a time when energy efficiency and sustainability are more critical than ever, the solar Group Captive PPA model provides a smart, long-term solution for businesses. 

Being one of the leading solar companies in India, Enernew brings years of experience in partnering with more than 50 companies and helping them transcend conventional energy constraints and meet their growing energy needs sustainably. The model provides a smart, scalable, and sustainable approach for businesses looking to secure long-term energy costs and meet renewable energy targets. Contact us today to create a solution to drive your business into an energy-efficient future.