Open Access Models in India: Third-Party, Captive and Group Captive

OPEN ACCESS SERIES · PART 02 · SLNKO RESEARCH DESK

The first post in this series set out what open access is: the right of an eligible consumer to use the shared grid to buy electricity from a source of its choosing. That is the concept. This post turns to the question that follows immediately from it - once a consumer has that right, how does it actually put it to use?

The structure a business chooses is not just a technical formality. It shapes project economics, regulatory obligations, contractual arrangements, capital requirements and long-term returns - which is why it deserves to be treated as a strategic decision, weighed against a company's consumption profile, capital allocation strategy and risk appetite, rather than a box to tick.

In India, the answer comes down to three models: third-party open access, captive, and group captive. All three give a consumer the same access to the grid, but they differ sharply in what they demand in ownership and capital, and in the charges they attract.

A word on scope. The charges themselves - the cross-subsidy surcharge, the additional surcharge, wheeling and the rest - are the subject of a later post in this series, so here they are described only far enough to explain why one model is chosen over another. The single point to carry through this discussion is straightforward: the largest commercial difference between the models is whether the arrangement qualifies as captive, because a qualifying captive arrangement is exempt from two of the heaviest charges an open access consumer would otherwise pay. Almost everything else follows from that.

01 One right, three ways to use it

The grid access in all three models is identical. What differs is the commercial and ownership structure that sits behind the meter. In a third-party arrangement, the consumer buys power from a plant someone else owns. In a captive arrangement, the consumer owns the plant and consumes its output. Group captive is the bridge between the two: several consumers share ownership of a single plant so that, together, they qualify as captive and each draws power from it. Reading them in that order - from no ownership, to full ownership, to shared ownership - is the clearest way to see how the models relate, and why a consumer would ever prefer one over another.

02 Third-party open access

In a third-party arrangement, a consumer buys electricity from a generator it does not own. An independent developer owns, finances, builds and operates the plant; the consumer signs a long-term power purchase agreement, or buys through a power exchange, and the electricity flows over the shared network to its premises. There is no equity to subscribe, no plant to build, and no long capital commitment - the consumer is simply a buyer contracting with a seller. That simplicity is the model's main attraction: a business can secure cleaner or cheaper power, often from a solar or wind project, without tying up capital or taking on the responsibility of owning generation.

The trade-off is cost. Because a third-party arrangement is not captive, it attracts the fuller set of open access charges, including the cross-subsidy surcharge and the additional surcharge that captive arrangements are spared. Those charges can be significant, and they are the reason many large consumers look past third-party sale toward a captive structure. The specific charges are covered in Part 3 of this series.

Third-party open access tends to suit businesses that:

• Prefer not to invest capital in power generation assets
• Want predictable, long-term renewable energy pricing without ownership responsibility
• Prioritise operational simplicity over the last increment of savings
• Want to begin sourcing green power quickly while weighing a more involved structure

03 Captive

A captive arrangement inverts the third-party model. Instead of buying from someone else's plant, the consumer owns the plant and generates electricity for its own use. This is recognised directly by the Electricity Act, 2003, which defines a captive generating plant as one set up primarily for the owner's own consumption, allows a person to build and operate such a plant without a generation licence, and gives that plant a right to open access to carry its power to the point of use.

The reason a consumer would take on the cost and responsibility of owning generation is the charge exemption. A plant that qualifies as captive, and the power its owners consume from it, is exempt from the cross-subsidy surcharge and the additional surcharge. For a large, steady consumer, that exemption can reshape the economics of self-generation entirely. The cost is commitment: a captive project requires capital, a long horizon, and the discipline to keep meeting the qualifying conditions year after year. How those charges work in practice is covered in Part 3 of this series.

Captive open access tends to suit businesses that:

• Have high and stable electricity consumption
• Are willing to commit capital for long-term savings
• Want direct control over energy procurement and project economics
• Have a long-term operational presence and view renewable energy as a strategic investment, not just a utility bill

04 The 26/51 rule: what makes a plant captive

Captive status is not a label a consumer can simply claim; it is a test a plant must pass every year. Rule 3 of the Electricity Rules, 2005 sets out the twin conditions. The captive users must collectively hold at least 26% of the ownership of the plant, and they must consume at least 51% of the electricity it generates, measured on an annual basis.

Ownership of at least 26%, and consumption of at least 51%, tested every year. That is the spine of the whole captive framework - and it applies to both single-user captive and group captive arrangements.

The annual nature of the test is what makes it demanding. Captive status is assessed for each financial year, and if a plant fails either condition in a given year, the consequence is severe: the electricity is treated as ordinary supply from a generating company for that year, and the surcharges the arrangement was designed to avoid become payable. A structure that looked captive on paper can therefore lose its status, and its central benefit, through nothing more than a shortfall in consumption. This is why captive and group captive projects are built around the careful, continuous management of the ownership and consumption ratios, rather than treated as a one-time approval. The surcharge mechanics themselves are covered in Part 3 of this series.

05 Group captive

Group captive is the model that has done the most to bring captive benefits within reach of ordinary commercial and industrial consumers, and it sits behind a large share of India's corporate renewable procurement. Rather than a single company funding an entire generating asset, several eligible consumers jointly invest so that, together, they meet the 26% and 51% thresholds, and each then draws captive power in line with its participation. No single consumer has to fund the whole asset - the qualifying conditions are met collectively.

In practice this is usually done through a special purpose vehicle. A developer builds and operates the plant and holds a majority of the equity, commonly around 74%, while the participating consumers hold the balance of at least 26% between them and contract to consume at least 51% of the generation. The consumers gain captive power, and the exemption from cross-subsidy and additional surcharge that comes with it, in exchange for a modest equity contribution rather than the cost of an entire plant. The developer gains committed offtake for the project.

Group captive tends to suit businesses that:

• Want the ownership benefits of captive status without developing an entire project themselves
• Have moderate but consistent electricity demand - not large enough to justify owning a full-scale plant alone
• Are comfortable participating in a shared investment structure, with the governance and shareholder coordination that entails
• Are pursuing long-term renewable procurement with optimised project economics rather than the fastest possible start

For a solar or wind asset serving a cluster of C&I buyers, this alignment - modest equity for the consumer, committed offtake for the developer - is why group captive has become the default route to captive status for many mid-sized consumers.

Structuring a group captive project?

SPV formation, equity splits and ongoing 26/51 compliance are where most group captive projects need specialised support. SLNKO works as an EPCM partner to help C&I clients structure and execute captive and group captive solar projects end to end. Talk to our team.

06 A framework in motion: the courts and the 2026 rules

Group captive has also been the most legally contested of the three models, precisely because so much money turns on whether a structure qualifies. Two developments have reshaped it recently, and anyone structuring a project today should be working from the current position rather than older guidance.

The first is a Supreme Court judgment, in Dakshin Gujarat Vij Company Limited against Gayatri Shakti Paper and Board Limited, which settled a long-running question by holding that a special purpose vehicle is an association of persons under Rule 3. That meant the proportionality requirement applied to SPV structures. The Court laid down what became known as the unitary qualifying ratio, under which each captive user had to consume, every year, at least roughly 1.96% of the plant's generation for every 1% of ownership it held, within a 10% band. The practical effect was a heavy dose of counterparty risk: if a single minority consumer fell short on its consumption, it could jeopardise the captive status of the whole plant and every other participant in it.

The second development responds directly to that risk. The Ministry of Power notified the Electricity (Amendment) Rules, 2026 on 13 March 2026, substituting Rule 3, with several provisions taking effect from 1 April 2026. The amendment keeps the core 26% and 51% thresholds but changes much of the machinery around them:

• Ownership is now defined to include a captive user together with its holding company, subsidiaries and co-subsidiaries, which may be treated as a single captive user - legitimising the layered corporate and SPV structures that industrial groups actually use
• The strict proportionality of the unitary qualifying ratio has been substantially relaxed: a consumer holding 26% or more of the ownership is freed from the proportionate consumption limit and may consume any amount as captive power
• A user's actual consumption now counts toward the collective thresholds even where it is not perfectly proportional, sharply reducing the counterparty risk the earlier position created
• For a plant built as a single SPV with more than one unit, captive status can now be assessed unit by unit rather than across the whole station
• The rules also recognise consumption routed through energy storage, and introduce a centralised verification mechanism with interim protection - surcharges are not levied while captive status is being verified, provided the required declaration is filed

Taken together, these changes make group captive both easier to structure and more certain to hold, which is why the model has drawn renewed attention from C&I consumers and developers alike.

Two cautions worth stating plainly: this is very recent law, notified in March 2026 with parts operational only from April 2026, and the surrounding machinery - including state nodal agencies and verification procedures - is still being put in place. The detailed position should be checked against the latest notifications before any structure is finalised.

Is your captive or group captive structure still compliant under the 2026 rules?

If you already hold equity in a captive or group captive plant, the March 2026 amendments may change how ownership, consumption and verification work for your arrangement. We can help you review whether your current structure still qualifies. Request a compliance review.

07 Choosing between the three

For a consumer deciding how to participate in open access, the three models line up along a single spectrum of commitment and reward. Third-party open access asks for nothing but a contract and offers the greatest flexibility, but it carries the full weight of the charges. Captive ownership asks for the most - a plant, the capital behind it, and continuous compliance - and in return delivers the full exemption from cross-subsidy and additional surcharge. Group captive sits deliberately in between: a shared, capital-light way to reach the same captive exemption without owning an entire plant, at the cost of a more involved structure and ongoing obligations to keep the arrangement qualifying.

Questions worth answering before choosing a model:

• What is our annual electricity consumption, and is it stable through the year?
• Are we willing to commit capital to a generation asset, and over what investment horizon?
• How much do we value ownership and control versus operational simplicity?
• What do the applicable state regulations require, and how do they treat each model?
• How would each structure affect our long-term energy costs, not just the headline tariff?

There is no universally superior model - the right answer depends on the consumer's profile, not a ranking of the three. A rapidly expanding manufacturer with a stable, high load may prioritise the long-term savings of a captive plant. A multinational with strict capital allocation policies may prefer the asset-light simplicity of third-party open access. A cluster of mid-sized industrial consumers in the same region may find group captive the most commercially attractive route to the same captive benefits none could justify alone.

Which one fits depends on how much capital a consumer is willing to commit, how long a horizon it can take, and how much the surcharge exemption is worth against the effort of qualifying for it. For most C&I buyers pursuing renewable power at scale in India today, that calculation has increasingly pointed toward group captive.

Not sure which open access model fits?

Whether you are evaluating third-party offtake, a single-user captive plant, or a group captive SPV, SLNKO can help you compare structures against your load profile, capital policy and state regulations - then execute the build as your EPCM partner. Talk to our team.

Phone: +91 62025 28672 | WhatsApp: +91 87962 60069 | Email: Contact us

Coming next in this series - two layers still to come

• [The charges and tariffs.](/media/blogs/open-access-charges-cost-stack-explained) The cross-subsidy surcharge, additional surcharge, wheeling and transmission charges, and banking terms that this post kept in the background - and that ultimately decide whether an open access arrangement pays off.
• The green framework. The green energy open access rules that lowered the entry threshold for renewables and opened a distinct, faster track for clean power.

Continue with Part 3: Open Access Charges - The Cost Stack.

Frequently Asked Questions

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Slnko Energy Private Limited

A technology-enabled solar EPC and EPCM partner working across India's utility-scale and commercial and industrial solar landscape. This series is written to make the open access framework legible, one layer at a time, from the perspective of the teams that plan, connect, and build the projects behind it.

Delivery models for the projects behind open access: Solar EPC vs EPCM.