Group Captive Solar 2026: 26% Equity Guide for North India

Direct Answer: How Does Group Captive Solar Work After the 2026 Rule Change?

A group captive solar plant qualifies under India’s revised Rule 3 when its captive users collectively hold at least 26% ownership and collectively consume at least 51% of the plant’s annual generation. Those two plant-level tests remain the foundation of captive status.

The Electricity (Amendment) Rules, 2026 add an important second layer for a plant owned through an Association of Persons or SPV:

• a captive user with less than 26% individual ownership receives captive treatment only up to 100% of its proportionate consumption entitlement;
• consumption above that individual limit is subject to cross-subsidy surcharge and additional surcharge, although it still counts toward the group’s collective 51% test;
• a user holding at least 26% individually is exempt from that individual cap;
• mid-year ownership changes use weighted-average shareholding; and
• intra-state status is verified by a state-designated nodal agency, while inter-state status is verified by the National Load Despatch Centre.

Commercial conclusion: group captive solar is no longer just “buy 26% equity and consume 51%.” A bankable structure must align the cap table, annual metered consumption, group-company relationships, open-access route and surcharge indemnities from the day the SPV is formed.

For a basic model overview, read our group captive solar primer. This page is the 2026 legal, commercial and operating playbook for North India buyers.

Legal and regulatory position last checked: 11 July 2026. This guide is not a legal opinion.

What Changed on 13 March 2026?

The Ministry of Power notified the Electricity (Amendment) Rules, 2026 as G.S.R. 186(E) on 13 March 2026, substituting Rule 3 of the Electricity Rules, 2005. The individual AoP consumption caps and the new verification framework took effect on 1 April 2026.

For a news-style summary of the amendment, see Electricity Amendment Rules 2026: What Changed for Captive Solar. This guide goes further: it shows how a North India industrial buyer should structure and operate the arrangement.

The 26% Ownership Test: What Does “Equity” Actually Mean?

The amended rule defines ownership as proprietary interest and control, or equity share capital carrying voting rights, held directly or through qualifying group entities.

Three practical consequences follow.

1. It Is an Ownership Test, Not a Marketing Price

“26% equity” does not automatically mean 26% of total project capex, 26% of debt plus equity, or a standard rupee amount per MW. The cash subscription depends on:

• the SPV’s paid-up voting equity;
• project debt and refinancing structure;
• the number of generating units identified for captive use;
• share pricing and securities issued;
• sponsor ownership; and
• the consumer’s allocated interest.

A proposal that quotes “₹X lakh per MW for 26% equity” without showing the post-money cap table, voting rights and project debt is incomplete.

2. Identified Units Can Be Tested Separately

If a generating station has multiple units, the SPV may identify one or more units for captive use. Rule 3 then tests:

• 51% consumption against generation from the identified captive units; and
• 26% ownership against the proportionate equity corresponding to those units.

The Gazette’s own illustration uses a two-unit, 100 MW station. If only one 50 MW unit is identified as captive, captive users need at least 13% of company equity—26% of the proportionate equity corresponding to that half of the station—and must consume at least 51% of that identified unit’s annual generation.

3. The 26% Must Be Real and Maintained

The annual verification process examines ownership and consumption during the relevant financial year. The shareholder agreement should prohibit transfers, pledges, dilution or voting-right changes that could push collective captive ownership below the threshold.

The 51% Consumption Test: Plant Status Is Collective

At least 51% of aggregate electricity generated by the captive plant or identified captive units during the financial year must be consumed for captive use.

This is a generation-based test, not simply 51% of scheduled power, contracted capacity or billed units. The compliance model must reconcile:

• ex-bus generation from the captive units;
• energy scheduled to captive users;
• transmission and distribution losses;
• metered consumption at each user;
• curtailment and deemed generation treatment under the contracts;
• energy routed through qualifying storage; and
• any energy sold to non-captive buyers.

If the minimum captive-consumption requirement fails, the rule says the entire electricity generated by the plant is treated as supply by a generating company, exposing the relevant consumption to CSS and additional surcharge.

The 2026 Proportionate-Consumption Formula

The amended Rules’ Schedule III uses this formula for a sub-26% user:

Individual captive eligibility limit = Total captive-user consumption × User ownership ÷ Total captive ownership

Where:

• total captive-user consumption is the group’s actual annual consumption as a share of plant generation;
• user ownership is that user’s ownership in the power plant; and
• total captive ownership is the ownership held by all captive users.

Worked Example: Three North India Factories in One SPV

Assume a 20 MW solar plant produces 32 million kWh in the financial year.

The captive users together own 30% and consume 70% of annual generation, so the collective 26% ownership and 51% consumption tests pass.

Factory B’s excess 4.67% is treated as non-captive supply and may attract CSS and additional surcharge. But the full 28% still counts toward the plant’s collective consumption test.

This is the most important operational difference from a simplistic 26/51 explanation: one user’s over-consumption no longer necessarily destroys group status, but the excess can lose the surcharge exemption.

What If One User Holds at Least 26% Individually?

If Factory A alone holds 26% or more ownership in the power plant, the individual proportionate-consumption cap does not apply to Factory A. Its entire actual consumption can qualify as captive consumption, subject to the plant satisfying the collective tests.

That anchor-user flexibility can be valuable, but concentrating 26% ownership in one buyer changes governance, balance-sheet exposure, exit rights and lender negotiations. It should be a deliberate structure—not an afterthought.

Group Companies Can Be Treated as One Captive User

For proportionate-consumption calculations, a captive user, its subsidiaries, its holding company and other subsidiaries of that holding company are collectively treated as a single captive user.

This can help a North India group with several factories—for example, a holding company with manufacturing subsidiaries in Faridabad, Greater Noida and Jaipur—manage consumption across entities.

The operating team still needs entity-level meter data and DISCOM reporting. “Treated as one person” for Rule 3 does not make separate electricity connections, state regulations, scheduling obligations or invoices disappear.

Why CSS and Additional-Surcharge Exemption Drives the Economics

Section 42 of the Electricity Act protects eligible captive consumption from cross-subsidy surcharge, and the revised Rule 3 expressly deals with both CSS and additional surcharge during verification.

But group captive does not mean “no grid charges.” A landed-cost model still needs:

Do Not Use One “North India Landed Cost” Number

The correct formula is:

Landed captive energy cost = Generator charge + network charges + loss-adjusted cost + SLDC/metering/banking/deviation charges + duties and taxes

Then compare that with the avoidable portion of the factory’s retail bill—not the total bill divided by units.

Fixed and demand charges may continue after open access. A ₹/kWh saving claim that compares group-captive landed energy with an all-in retail average can overstate savings.

State Route 1: Haryana Consumer and Haryana Plant

For a Faridabad, Gurugram, Manesar or Bawal factory taking intrastate captive power:

• HERC’s Green Energy Open Access Regulations, 2023 and its amendment govern the open-access route;
• captive status for FY 2026-27 is verified by Haryana’s designated nodal agency under the 2026 Rules;
• current transmission, wheeling, SLDC, losses and taxes must be taken from the latest HERC/HVPN/DHBVN or UHBVN orders;
• CSS and additional surcharge should not be included on verified eligible captive consumption;
• the facility’s existing contract-demand and fixed-charge exposure should remain in the comparison unless an approved reduction is obtained; and
• the financial model should use the verified FY 2026-27 retail energy tariff from the factory’s bill.

For the current DHBVN tariff baseline, see our DHBVN solar and tariff guide.

State Route 2: Rajasthan Plant and Rajasthan Consumer

Rajasthan’s RERC (Terms and Conditions for Green Energy Open Access) Regulations, 2025 establish the state framework. A same-state group captive project should examine:

• RERC open-access procedure and approved capacity;
• current RVPN/DISCOM transmission and wheeling charges;
• transmission and wheeling losses;
• banking eligibility, charge and settlement window;
• SLDC fees and deviation settlement;
• parallel-operation charges, if applicable;
• state nodal verification under Rule 3; and
• consumer tariff and voltage category.

Rajasthan’s strong solar resource may lower the generator charge, but it does not remove network, banking or compliance costs.

State Route 3: Uttar Pradesh Plant or Consumer

UPERC’s notified Captive and Renewable Energy Generating Plants Regulations, 2024 apply to renewable captive plants from 100 kW upward and state that captive generating plants are not liable for CSS, while transmission, wheeling, other applicable charges and losses remain payable.

For a Greater Noida, Noida, Ghaziabad or Kanpur factory, verify:

• the latest UPERC Open Access Regulations and 2026 removal-of-difficulty order;
• UPPTCL transmission tariff for FY 2026-27;
• DISCOM wheeling charges and losses at the connection voltage;
• UPSLDC registration, scheduling and monthly charges;
• banking eligibility and restrictions;
• whether the plant and all users remain within Uttar Pradesh for state verification; and
• the factory’s avoidable retail energy charge.

State Route 4: Rajasthan or UP Plant Supplying a Haryana or Delhi-NCR Consumer

Where the captive plant and its users are located in more than one state, the 2026 Rules assign captive-status verification to the NLDC.

An inter-state model must add:

• inter-state connectivity and open-access approvals;
• current ISTS transmission-charge and loss treatment;
• injection-state charges;
• drawal-state transmission, wheeling and SLDC charges;
• scheduling across regional and state load-despatch centres;
• deviation settlement;
• metering and energy-account reconciliation; and
• current waiver eligibility, commissioning deadlines and change-in-law allocation.

For a Delhi consumer, also check the DERC Green Energy Open Access Regulations, 2024, applicable charges and RPO reporting. Delhi’s limited land availability often makes off-site inter-state procurement the practical route, but it is operationally and contractually more complex than a same-state project.

SPV Structure: The Documents That Must Agree

A group captive arrangement usually combines at least five contracts:

1. Share Subscription Agreement — how and when the captive user acquires voting equity.
2. Shareholders’ Agreement — governance, reserved matters, transfers, dilution, defaults and exit.
3. Power Purchase or Energy-Use Agreement — tariff, allocation, scheduling, billing, generation risk and change in law.
4. EPC and O&M contracts — plant delivery and performance obligations.
5. Open-access and grid agreements — connectivity, wheeling, scheduling, metering and settlement.

If the ownership allocation in the SHA does not match the energy allocation mechanics in the PPA and the annual compliance model, the structure is fragile even if every document looks reasonable in isolation.

Twelve Contract Clauses a Captive Buyer Should Negotiate

1. Captive-Status Covenant

Require the SPV and every user to maintain the collective ownership and consumption tests and provide monthly compliance data.

2. Individual Entitlement Formula

Write the Rule 3 formula into the agreement. The buyer should see its ownership, total captive ownership, group consumption and annual eligibility limit.

3. Monthly Early-Warning Thresholds

Do not wait until March. Trigger remediation when projected year-end ownership or consumption headroom falls below an agreed buffer.

4. Surcharge Indemnity

Allocate CSS, additional surcharge and carrying cost based on cause. A compliant user should not automatically bear a co-user’s excess draw or equity default.

5. Replacement-Consumer Mechanism

Specify how an under-consuming or exiting user is replaced, including share transfer, DISCOM/NLDC filings and interim energy sale.

6. Equity Dilution Protection

Prohibit any issuance, conversion, transfer or pledge that could reduce captive ownership or voting rights below the required level.

7. Change-in-Law Pass-Through

Separate generator-side taxes, network charges, surcharge changes and captive-law changes. Define evidence, notice, mitigation and sharing.

8. Generation and Availability Guarantee

State the measurement point, deemed generation, curtailment, grid outage treatment and annual shortfall remedy.

9. Banking and Curtailment Risk

Allocate lost units, banked-energy expiry, scheduling changes and forced curtailment. Do not assume the state will permit annual banking for the PPA term.

10. Metering and Data Access

Give each user timely access to generation, schedule, injection, drawal, loss and billing data sufficient to reproduce the annual Rule 3 test.

11. Exit and Put/Call Rights

An exit must preserve captive status and avoid a period in which ownership and consumption no longer align. Link share transfer and power reallocation closing conditions.

12. Lender Step-In and Enforcement

Ensure project lenders cannot enforce security or change control in a way that destroys voting ownership, the SPV’s permitted purpose or captive compliance without a cure process.

A Monthly Compliance Dashboard for FY 2026-27

A serious group captive project should track these fields every month:

Run a downside forecast for maintenance shutdowns, seasonal demand, production cuts, delayed commissioning and a user exit. A plant that clears 51% only in the base forecast has no compliance margin.

How Much Consumption Headroom Is Sensible?

The law sets 51%; it does not require a particular buffer. The appropriate buffer depends on:

• production volatility;
• seasonal loads;
• expected generation variability;
• curtailment treatment;
• user credit quality;
• replacement-buyer availability; and
• banking rules.

A buyer should ask the developer for downside scenarios, not accept an arbitrary “10% buffer.” The model should show the lowest plausible collective consumption as a percentage of ex-bus generation and the surcharge exposure if the plant fails.

Group Captive vs Third-Party Open Access vs Rooftop

The usual hierarchy is: maximize high-value direct-use rooftop solar first, then evaluate group captive for the stable residual load. See our open access solar service and general open access guide.

When Group Captive Is a Strong Fit

Proceed to detailed feasibility when the buyer has:

• stable annual demand and a credible five- to ten-year load forecast;
• material open-access consumption after rooftop solar;
• sufficient balance-sheet capacity for voting equity;
• willingness to sign a long-term PPA and shareholder agreement;
• finance, legal and energy teams capable of annual compliance;
• a credible developer and bankable operating plant or project; and
• enough savings headroom to survive adverse charge, loss and generation scenarios.

When Group Captive Is the Wrong Fit

Prefer rooftop, RESCO, green tariff or third-party open access when:

• demand is small or highly volatile;
• the business may relocate, sell the plant or shut a line;
• the buyer cannot hold or account for SPV equity;
• annual consumption could fall below the group’s required threshold;
• the buyer needs a short contract;
• open-access approvals or grid capacity are uncertain; or
• the savings case depends on unverified waivers or a single generic landed-cost number.

Due-Diligence Checklist Before Signing

Legal and Corporate

• Rule 3 memo from specialist counsel.
• SPV objects restricted to owning, operating and maintaining the generating station.
• Fully diluted cap table and voting rights.
• Group-company ownership map.
• Lender security and enforcement review.
• Transfer, dilution and exit controls.

Regulatory and Grid

• Connectivity and open-access approvals.
• Latest state transmission, wheeling, loss and SLDC orders.
• Banking and deviation rules.
• Intra-state versus inter-state verification route.
• Declaration and annual verification procedure.
• RPO/REC ownership and reporting.

Technical

• Land and evacuation rights.
• Generation study and P90/P95 cases.
• Metering architecture and data access.
• Curtailment history at the injection point.
• O&M capability and spares.
• ESS treatment if storage is included.

Financial

• Generator tariff and escalation.
• Loss-adjusted delivered energy.
• All remaining network and statutory charges.
• Retail bill components actually avoided.
• Downside CSS/AS exposure.
• Equity cash flow, dividend policy and exit value.
• Change-in-law sensitivities.

Implementation Sequence

1. Load and bill audit: collect 12 months of interval data and bills for every proposed user.
2. Route selection: compare same-state and inter-state project options.
3. Preliminary grid study: test connectivity, open-access capacity and metering.
4. Rule 3 model: build the cap table, collective test and user entitlement model.
5. Downside sizing: stress demand, generation, curtailment and user exit.
6. Term-sheet negotiation: align equity, energy allocation and surcharge risk.
7. Legal documentation: execute SSA, SHA, PPA and security documents as one package.
8. Applications and metering: obtain connectivity, open access and scheduling approvals.
9. Commissioning and first-year controls: track partial-year ownership and generation.
10. Monthly compliance and annual verification: file declarations and resolve queries before surcharge exposure crystallises.

Frequently Asked Questions

Do all captive users individually need 26% ownership?

No. The captive users collectively must hold at least 26% ownership. An individual user may hold less. However, a sub-26% user’s captive treatment is capped at its proportionate-consumption entitlement under the 2026 AoP rules.

Do captive users still have to consume 51% individually?

No. At least 51% of annual generation must be consumed collectively by all captive users. Individual users have entitlement caps, but one user’s excess does not automatically fail the plant’s collective test.

How is a user’s proportionate consumption calculated?

The Schedule III formula is: total captive-user consumption multiplied by the user’s ownership, divided by total captive ownership. The calculation uses annual data and weighted-average shareholding where ownership changes during the year.

What happens if a minority user consumes above its entitlement?

The excess is treated as non-captive supply and may attract CSS and additional surcharge. The full consumption still counts toward the group’s collective 51% verification.

What happens if the group consumes less than 51%?

The plant can fail captive verification for that financial year. The Rules provide for CSS and additional surcharge, plus carrying cost after failed verification. The contracts should allocate that risk based on cause.

Can a large anchor user consume more than its proportionate entitlement?

Yes, if that individual user holds at least 26% ownership in the power plant, Rule 3 exempts it from the individual proportionate-consumption cap. The plant must still satisfy its collective tests.

Can sister companies aggregate their ownership and consumption?

The amended Rule treats a captive user, its subsidiaries, holding company and fellow subsidiaries collectively as a single captive user for proportionate-consumption calculation. Entity-level regulatory reporting and metering may still be required.

Who verifies a Rajasthan plant supplying a Haryana factory?

Because the plant and captive user are in more than one state, captive-status verification is assigned to the NLDC under Rule 3(4). State and regional open-access approvals remain separate requirements.

Are CSS and additional surcharge billed while verification is pending?

The 2026 Rules say they should not be levied pending verification if the captive users furnish the prescribed declaration. Failed verification later triggers the applicable surcharges with carrying cost.

Does group captive eliminate transmission and wheeling charges?

No. Captive status protects eligible consumption from CSS and additional surcharge. Transmission, wheeling, losses, SLDC, banking, metering, deviation, duty and other applicable components must still be modelled.

Does the 26% equity investment qualify for accelerated depreciation at the consumer?

Do not assume so. The generating SPV owns the solar asset and may claim depreciation subject to applicable tax law. A consumer’s shares in the SPV are a financial investment, not automatically the plant asset on the consumer’s tax block. Obtain tax advice for the specific structure.

Can group captive include battery storage?

Yes. The amended definition recognises electricity consumed through an ESS used to store energy generated from the captive plant. The storage, metering, loss accounting and state open-access treatment still need to be documented. Use our Haryana factory solar-plus-BESS business-case framework to separate genuine storage value from generic arbitrage claims.

Primary Sources

• Electricity (Amendment) Rules, 2026 — G.S.R. 186(E), Official Gazette
• Press Information Bureau — Government notifies Electricity (Amendment) Rules, 2026
• Electricity Act, 2003 — India Code
• HERC Green Energy Open Access Regulations, 2023 — DHBVN Sales Circular D-20/2023
• HERC Green Energy Open Access Regulations — First Amendment, 2025
• RERC Regulations Index — Green Energy Open Access Regulations, 2025
• UPERC Captive and Renewable Energy Generating Plants Regulations, 2024 — India Code copy
• DERC Green Energy Open Access Regulations, 2024

This guide is educational and does not replace legal, tax, grid-connectivity or open-access advice. Group captive status is tested on actual ownership, generation and consumption data; obtain project-specific opinions and current state orders before investing.