As India’s industrial landscape becomes more energy-intensive and cost-sensitive, business leaders are increasingly turning to captive power plant and group captive power plant models to future-proof operations. Whether you’re running a data center, a cement plant, or a pharma manufacturing facility, securing reliable, round-the-clock, cost-effective clean energy is now a strategic imperative.
This blog breaks down the real-world economics and regulatory nuances of captive and group captive power setups in India. Backed by updated legal definitions and current market trends, it’s designed to help you make an informed, compliant investment decision. It also gives you clarity on what is captive power plant and what is a group captive project, especially in the Indian regulatory context.
For large power consumers, two proven pathways stand out:
Captive Power (self or jointly owned with an Independent Producer)
Group Captive Power
Both models enable businesses to buy power directly from a renewable energy plant—typically solar or wind – at significantly lower tariffs compared to grid power. Crucially, both offer exemption from Cross Subsidy Surcharge (CSS) and Additional Surcharge (AS) under the Electricity Act and Open Access Rules.
But the ownership, investment, and operational structures differ – and so do the strategic implications.
| Model | Ownership Requirement | Consumer Type | Consumption Rule | Key Advantage |
| Captive – Self-Owned | 100% ownership of the power asset | One industrial consumer who owns its plant | ≥51% of power generated | Full control; CSS & AS exemption |
| Captive – With IPP | ≥26% equity in SPV by consumer and rest by the Power Producer | One large consumer | ≥51% of power generated | Minimal CapEx; CSS & AS exemption |
| Group Captive | ≥26% equity in SPV (can be) by multiple customers + ≥51% power usage collectively | Multiple consumers | Each consumes part of the 51% load | Shared ownership; CSS & AS exemption; lower entry barrier |
Ideal for corporates that:
How it works (a simple explanation of the captive power plant process):
Strategic Benefit: Full tariff control, strongest long-term savings, and total energy independence. But comes with the burden of operating and maintaining the plant—understanding the working of captive power plants is crucial to success.
Best suited for:
How it works:
Strategic Benefit: CSS & AS savings with minimal CapEx involvement. Fast-track green power adoption without the burden of running the captive power plant itself.
Ideal for:
How it works:
The group captive power plant model has become popular among pharma, IT, and textile companies due to its shared CapEx approach. In many cases, a group captive solar power plant offers the most viable path to sustainability without overburdening a single company.
| Cost Element | Captive/Group Captive Arrangement with Power Producers | Discom |
| Power Tariff | ₹3.5 – ₹4.5/kWh | ₹7 – ₹10+/kWh |
| CSS (Cross-Subsidy Surcharge) | Exempt | Applicable |
| AS (Additional Surcharge) | Exempt | Applicable |
| Capex | Min. Requirement | None |
| ROI Period | 4–6 years (depending on model) | Loss in long run |
While CSS and AS exemptions make these models financially attractive, they come with stringent compliance requirements:
These rules are applicable to both captive power plant and group captive power plant models. Businesses looking for captive power plant examples can study the strategies of companies in cement and steel, where ownership and usage audits are crucial to compliance.
For businesses with large, consistent power loads—like data centers, cement plants, iron & steel, metals and chemicals (the commercial and industrial sector)—partnering with the right IPP unlocks maximum value.
A Group Captive Power Plant helps reduce electricity costs by allowing multiple businesses to share the investment and operational expenses. By owning at least 26% of the project, they benefit from lower tariffs and exemptions from cross-subsidy and additional surcharges which leads to guaranteed savings compared to grid power.
Yes, renewable energy can be used in both Captive and Group Captive Power Plants. Owners can incorporate solar, wind, or other renewable sources depending on availability and cost-effectiveness. Using renewable energy helps reduce the carbon footprint and energy costs and provides an environmentally friendly power solution.
Industries benefit from shifting to a Group Captive Solar Power Plant by reducing electricity costs, as they share investment and operational expenses. They also gain exemption from cross-subsidy and additional surcharges and enjoy guaranteed savings with lower tariff rates, all while supporting sustainable energy solutions.
In India, captive power plant owners can benefit from government subsidies, tax exemptions, accelerated depreciation, and investment tax credits. Additional incentives include net metering, feed-in tariffs, renewable energy certificates, and low-interest loans, all aimed at reducing costs and encouraging clean energy use.
Industries transition from grid power to captive power by first assessing their energy needs. They then invest in their power plants, such as generators or renewable sources. This helps them control costs, ensure a reliable supply, and reduce dependence on the grid. Proper planning and installation are essential for a smooth switch.
