Group Captive Solar Model

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The group captive solar model is a specific legal structure under India’s Electricity Act 2003 that lets businesses (and their investors) consume solar power at well below grid rates by becoming part-owners of the generating plant. It’s the structure that consistently produces the best landed-cost economics for solar in India.

The key rules:

The consumer (or group of consumers) must own at least 26% equity in the generating SPV.
At least 51% of the power generated must be consumed by that group.
Captive consumers are exempt from cross-subsidy surcharge (CSS) and additional surcharges.

That exemption is the whole game. CSS and ASC together typically add ₹1–4/unit to the landed cost of open-access solar — large enough that captive consumers pay 30–40% less per unit than they would under a standard PPA.

How the structure works

A Special Purpose Vehicle (SPV) is formed to own the solar plant. Equity in the SPV is held by a combination of:

The captive consumers (industries, IT campuses, manufacturing plants) — collectively 26% or more
The EPC developer or financial investors — the remaining 74% or less

The captive consumers commit to consuming at least 51% of the generated electricity. The remainder can be sold into the open market.

Cash flows:

Each captive owner pays a tariff equal to “cost of generation + a small return on equity”
Because CSS and ASC are exempt, the landed cost lands well below DISCOM commercial rates (typically ₹4–5/unit vs ₹8–10/unit)
Excess generation revenue from non-captive sales flows back to the SPV

What it costs investors

For a 1 MW plant, the 26% equity slice is roughly ₹1–1.5 crore, often split across multiple group companies. So with a few crores, an investor could:

Take a 26% stake in a 2–3 MW plant, providing power to multiple consumer entities
Or take a smaller stake (with another group) in a larger 5–10 MW plant

The EPC partner provides the remaining equity, structures the SPV, handles land procurement, BESCOM approvals, construction, and ongoing O&M.

Steps from zero to commissioned plant

Identify or form the captive consumer group. They must have actual electricity consumption to absorb the 51%+ requirement.
Engage an EPC partner (Dexler Energy, CleanMax, Fourth Partner Energy, etc.) experienced in group captive structures.
Form an SPV under the Electricity Act 2003 with the legal framework defined. CA certification annually.
Site selection and land acquisition (or solar park plot purchase).
EPC construction, regulatory approvals (CEIG, DISCOM, open access).
Commissioning and power supply begins.
Group captive registration with the State Load Despatch Centre (SLDC) and KERC (or equivalent).

The EPC partner does most of the heavy lifting; the investor’s job is mostly capital commitment and due diligence.

What the captive consumer gets

Concrete numbers:

DISCOM commercial tariff in Karnataka: ₹8.50–10/unit
Open-access solar landed cost: ₹6–7/unit (after CSS, ASC, wheeling)
Group captive landed cost: ₹4–5/unit (CSS and ASC exempt)

For a consumer using 1 MW (~14 lakh units/year), the savings vs DISCOM are roughly:

Standard open access: ₹40–50 lakh/year savings
Group captive: ₹70–80 lakh/year savings

That’s why every major IT campus in Bangalore (Adobe, Infosys, Wipro, BIA) has either signed a third-party PPA or set up a group captive structure.

What investors get

The economics for the non-consuming (financial) portion of the equity:

Annual yield: 10–12% pre-tax on the equity investment
Payback on equity: 7–10 years
Accelerated depreciation: 40% in year one (significant tax shield if the investor has taxable profits)
Plant life: 25+ years

Risks specific to group captive

Beyond the standard solar risks (covered here):

Consumer churn. If captive consumers leave (factory shuts, IT campus moves, etc.), the 51% consumption requirement can be breached, jeopardising the captive status.
Compliance audit. SLDC and KERC audit the 26%/51% requirements annually. Non-compliance can result in retroactive imposition of CSS and ASC.
Regulatory shifts. DISCOMs that are losing C&I customers to group captive structures are increasingly petitioning regulators to impose new charges. Karnataka’s BESCOM has filed such a petition.

Mitigation: structure the captive group with diversified consumers (multiple industries, multiple geographies if possible) so the loss of any single one doesn’t break the 51% threshold.

When the model fits

The group captive model is the right choice when:

The investor has access to (or is part of) a group of businesses that collectively consume 1 MW+ of power
The investor has capital for a 26% equity slice (₹1.5 cr+ per MW)
The structure can be maintained for at least 10 years (mid-term commitment)

It does not fit when:

The investor has no current power consumption and no group affiliation. In that case, a standard PPA-based shared solar park investment is simpler.