Third-Party PPA vs Group Captive Solar in Madhya Pradesh

The two structures

Third-party PPA. A generator owns the plant outright and sells you power under a long-term power purchase agreement. You put in no capital, hold no equity, and carry no plant risk. In exchange, every unit you draw attracts the full set of open access charges: wheeling, cross subsidy surcharge and additional surcharge.

Group captive. You and other consumers hold at least 26% of the equity in the generating company and together consume at least 51% of its output, in proportion to your shareholding. The plant is then legally a captive generating plant, and captive consumption is exempt from cross subsidy surcharge and additional surcharge. The developer typically holds the remaining equity and manages the plant.

What the Electricity Rules 2026 changed

The Electricity (Amendment) Rules, 2026 restated the captive test: not less than 26% of ownership by the captive users, and not less than 51% of the aggregate electricity generated consumed by them, computed on an annual basis, with proportionality to shareholding for group captive. The explanatory note clarified that the test is applied to the special purpose vehicle that owns the plant, and that ownership must be genuine equity with voting rights, not a nominal or redeemable instrument. Structures that used preference shares or unpaid equity to tick the 26% box are the ones regulators now look at hardest.

Cost comparison at 33 kV, FY2026-27

	Third-party PPA	Group captive
Cross subsidy surcharge	₹1.49/kWh (HV-3.1)	Exempt
Additional surcharge	₹1.18/kWh	Exempt
Wheeling (33 kV)	₹0.17/kWh	₹0.17/kWh
Transmission	As applicable	As applicable
Equity from consumer	None	26% of plant SPV equity, roughly ₹25–35 lakh per MW at current costs
Consumption obligation	Take-or-pay under PPA	51% of generation, annually, plus PPA terms
Balance sheet	Off balance sheet	Equity investment appears; plant does not
Typical saving vs daytime grid	Near nil at current charges	₹2–3 per unit

Charges are from the MPERC FY2026-27 tariff order. Equity per MW is our indicative estimate and depends on the developer's capital structure.

When third-party still makes sense

You are an HV-3.4 power intensive consumer with CSS at ₹0.90 and a very high load factor.
You are EHT-connected (132 kV and above), so wheeling does not apply and transmission is the only wires charge.
Your board will not approve equity in an energy SPV, and a modest saving with zero capital is worth more than a larger saving with paperwork.
You expect CSS and AS to fall. They are re-determined every tariff order and have moved both ways.

When group captive makes sense

Contracted demand of 2 MW or more, so that the 26% equity is a rounding error against annual savings.
A stable, daytime-heavy load that can honour the 51% consumption test every year.
A promoter who is comfortable owning a minority stake in a generating company and reviewing its accounts once a year.

Our position

We build the plant either way. On a third-party structure we quote a tariff and carry all plant risk; on a group captive structure we hold the majority equity, operate the plant and pass the CSS and AS exemption through to you in the tariff. What we will not do is quote you a group captive saving on a third-party structure, which is the most common way this comparison goes wrong in sales presentations.

If you want to know which side of the line your plant falls on, send 12 months of bills for a free one-page reading; the reading states the structure we would recommend and why.

Questions on this topic

What is the 26% and 51% rule for group captive solar?

To qualify as captive, the consuming entities must together hold not less than 26% of the equity in the generating company and consume not less than 51% of the electricity generated on an annual basis, in proportion to their shareholding. Captive consumption is then exempt from cross subsidy surcharge and additional surcharge.

Is group captive cheaper than a third-party PPA in Madhya Pradesh?

Usually yes for an HV-3.1 industrial consumer at 33 kV, because it avoids about Rs 2.67 per kWh of CSS and additional surcharge at FY2026-27 rates. The consumer must contribute 26% of the plant SPV equity and honour the 51% consumption test.

Third-party PPA vs group captive: which open access structure fits your Madhya Pradesh plant