Can Your Apartment Association Generate Its Own Power? Karnataka's 2026 Rules, Contracts and Risks

Yes, an apartment association can generate its own power, and the Electricity Act, 2003 has said so since the day it was passed. Section 2(8) defines a captive generating plant to include a plant set up by a co-operative society or an association of persons to generate electricity primarily for the use of its members, and Section 9(1) allows any person to construct, maintain or operate a captive generating plant without a licence. Bengaluru's gated communities received striking news in July 2026: reports that apartment complexes can now set up their own power stations to supply residents. The timing is loaded, because the same season has KERC proposing steep cuts to rooftop solar export tariffs for 2026-29, draft regulations that would mandate battery storage for rooftop systems above 10 kW, and the loudest fight over electricity distribution Karnataka has seen in decades.

Part of the RERA and homebuyer disputes practice at S Jain & Attorneys, Bangalore.

Community energy is genuinely promising for a power hungry city of dense high rises. But an apartment association is a consumer collective, not a utility, until the day it signs papers that make it one, and most RWA energy disasters are contract disasters signed in enthusiasm at an AGM. This guide gives managing committees the full legal picture: the statutory hooks that make community generation lawful, the ownership models and their radically different risk profiles, the metering and tariff conditions that decide project economics, the association-law formalities that make the decision valid, and the questions to force onto the table before any vendor's presentation ends in a signature.

Key takeaway. The first question is never the technology; it is who owns the asset. An association that owns a power plant owns its warranties, its maintenance, its failures and its liabilities for twenty years. An association that buys output under an opex model owns a contract, and everything then depends on what that contract says about exit, performance and failure. Decide the model first; everything else follows from it.

The legal foundations: what lets a community generate at all

Three legal layers stack up behind the headline:

• The Electricity Act, 2003. Section 2(8) defines a captive generating plant to include one set up by a co-operative society or an association of persons to generate electricity primarily for the use of its members, which is the statutory hook a residents' association actually stands on. Section 9(1) permits captive generation without a licence, and Section 9(2) gives a captive generator the right to open access to carry electricity from the plant to the destination of its use, subject to transmission availability. Section 43 keeps the distribution licensee's duty to supply on request intact, and Section 42 governs open access. Distribution to third parties remains licensed territory; supplying your own members within a defined premises is the space community projects occupy, and the July 2026 reports mark Karnataka operationalising exactly that space for gated communities.
• The captive test in the Electricity Rules, 2005. Rule 3 sets the qualifying conditions for a captive generating plant: the captive users must together hold not less than 26 percent of the ownership and consume not less than 51 percent of the electricity generated, determined on an annual basis, with consumption in proportion to ownership. For a rooftop plant owned by the association itself and consumed inside the complex the test is usually easy. It becomes a live issue the moment a special purpose vehicle, a developer stake or an outside investor enters the ownership chart, and it is a question to answer before the shareholding is fixed, not after.
• KERC's regulations decide the economics: net metering and banking rules, export tariffs, connection charges, and the pending DSPV (distributed solar) framework. These are being redrawn right now, which is the single most important fact for any committee evaluating a vendor's payback spreadsheet.
• Association law. Under the Karnataka Apartment Ownership Act, 1972 and the societies/KOFA framework, common-area decisions of this magnitude need the association's bye-laws followed to the letter: general-body resolutions with the prescribed majority, transparent procurement, and committee authority properly recorded. Section 3 of the 1972 Act defines common areas and facilities to include the roofs of the building and the installations of central services such as power and light, so the roof a vendor wants is not the committee's to give away. An energy contract signed on a committee's enthusiasm without general-body sanction is a dispute waiting for its first outage.

The two models: own the plant, or buy the power

Neither model is wrong; they allocate the same risks to different balance sheets. The recurring failure is hybrid confusion: an association that paid capex prices but signed opex-grade contracts, ending up with the liabilities of an owner and the control of a customer.

The regulatory boundary: where project economics are actually decided

Committees evaluate solar proposals on the vendor's payback slide. The variables that actually decide payback live at the grid boundary, in the central rules and in KERC's rulebook:

• Export tariffs are falling. KERC's 2026-29 proposals cut what surplus units earn. A project financed on today's export price can be underwater on next year's, which is why self-consumption-heavy designs (sized to the community's daytime common-area and pumping loads) are structurally safer than export-dependent ones.
• Storage mandates are coming. Draft DSPV regulations would require batteries with systems above 10 kW, changing capex, replacement cycles and O&M obligations. Contracts signed before the final regulations should price the contingency explicitly.
• Metering architecture matters: net metering versus gross metering, single-point supply for the community versus individual connections, and how common-area versus apartment consumption is measured. Each choice changes both the economics and who bears billing disputes with the ESCOM. Residents' individual billing rights, including the new 15-clear-day payment window, are covered in our guide to electricity consumer rights in Karnataka.
• Backup and standby: the ESCOM connection does not disappear. Section 43 of the Electricity Act keeps the licensee's duty to supply alive, but standby charges and the terms of grid backup during plant failure must be written down before the first outage, not negotiated during it.

The national floor for metering sits in the Electricity (Rights of Consumers) Rules, 2020, which recognise a consumer who installs a rooftop solar unit as a prosumer with the rights of an ordinary consumer plus the right to generate. The Electricity (Rights of Consumers) Amendment Rules, 2021, notified on 29 June 2021, provide that where the state regulations do not already provide otherwise, the Commission may allow net metering for loads up to 500 kW or up to the sanctioned load, whichever is lower, with net billing or net feed-in for larger loads, the detailed arrangements being as specified by the State Commission. For a large Bengaluru complex, whose sanctioned load can run well past that figure, which side of the line the project falls on is not a technical footnote. It is the whole revenue model.

The contract clauses that decide the next twenty years

Whether capex or opex, the papers should answer these before signature:

• Performance guarantees with remedies: a guaranteed generation figure (units per kWp per year), measured how, with liquidated damages or tariff rebates when missed, not aspirational "estimated generation" language.
• Warranty architecture: module performance warranties (typically 25 years, degradation-stepped), inverter warranties (5 to 10 years), workmanship warranties, and, critically, who enforces them: an association facing a defunct EPC vendor discovers that manufacturer warranties it never held directly are hard to invoke.
• O&M scope and response times: cleaning cycles, monitoring, breakdown response hours, spares, with termination rights for chronic failure.
• Exit and buy-out (opex): the schedule at which the association can buy the system, what happens on vendor insolvency, and asset ownership at term-end. On vendor insolvency the panels on your roof may be a lender's security; take undertakings and check charges.
• Insurance and liability: fire, structural load, third-party injury on common-area installations, and who indemnifies whom. Roof waterproofing warranties, easily voided by penetrative mounting, deserve their own clause.
• Regulatory change: a clause that says what happens to price and scope if the final DSPV regulations mandate storage, if the export tariff is revised, or if the metering category changes. Without it, the association absorbs every regulatory movement and the vendor absorbs none.
• Roof licence, not roof lease: the document that lets the vendor onto the roof should be a revocable licence for a defined area and a defined purpose, with reinstatement obligations, not anything that reads like a transfer of an interest in common property.
• Dispute resolution: a sensibly seated arbitration clause for the vendor contracts, remembering the map of what can and cannot be arbitrated, covered in our guide to non-arbitrable disputes in India.

Common mistake. Letting the vendor's draft govern. Solar EPC and PPA templates are written by vendors' counsel for vendors, and the default drafts routinely omit generation guarantees, cap liability at trivial figures, and make exit practically impossible. The association's leverage exists on exactly one day: the day before signature. Spend it.

Governance: making the decision stick inside the association

Half the disputes in community energy are internal. The committee that signs without general-body sanction, the treasurer who committed corpus funds to capex, the tower that objects to roof allocation, the member who challenges the procurement. The discipline that prevents all of it: a general-body resolution on the model and budget with the bye-law majority, a documented comparison of at least three proposals, minutes recording the delegation of signing authority, and transparent circulation of the final contract before execution. Under the apartment-ownership framework the roof is common area belonging to all owners; treating it as the committee's to allocate is the fastest route to a civil suit that outlives the panels' warranty.

The decision sequence a managing committee should actually follow

1. Measure the load before you shop. Pull twelve months of ESCOM bills for the common-area connection and, where they exist, the bulk supply meters. Separate the daytime load (lifts, pumps, STP, lighting, clubhouse) from the night load. This single sheet decides the honest system size, and it is the number vendors will otherwise choose for you.
2. Get the roof surveyed independently. Structural load capacity, remaining life of the waterproofing, shading from water tanks and lift rooms, and access for cleaning. An engineer's report before tendering costs a fraction of a roof leak after installation.
3. Choose the model in principle, at the committee, in writing. Capex or opex, and the reasoning, minuted. Do not let the model be decided by whichever vendor presents most persuasively.
4. Take the mandate to the general body. Circulate the agenda with the notice period the bye-laws require, present both models with indicative numbers, and pass a resolution that authorises the model, the budget ceiling, the funding source and the persons who may sign.
5. Tender properly. A written scope, at least three comparable proposals on the same specification, and a comparison sheet that puts guaranteed generation, warranty terms and O&M obligations side by side with price. Price-only comparison is how associations buy the cheapest inverter in Karnataka.
6. Fix the grid interface before you fix the price. Confirm with the ESCOM which metering category the sanctioned load puts you in, what the connection and standby charges will be, and what approvals the feasibility and net metering application require. A payback model built before this step is fiction.
7. Have the contract reviewed and rewritten, not merely read. Insert the generation guarantee, the remedy for shortfall, the O&M response times, the regulatory-change clause, the roof licence terms, the insurance obligations and the exit or buy-out schedule.
8. Circulate the final draft to members before signature and record the objections and the answers in the minutes. This is what converts a contested decision into a defensible one.
9. Execute, and build the file the same week. Signed contract, warranty certificates in the association's own name where possible, approvals, the metering agreement, insurance policy, commissioning report and the monitoring login credentials, all in one place with a copy off site.
10. Handover discipline at every committee change. The energy file, the O&M calendar, the generation log and the warranty expiry dates should pass to the incoming committee as a documented handover, not as folklore.

Deadline warning. KERC's 2026-29 tariff proposals and the draft DSPV regulations are, at the time of writing, still in the consultation stage. Associations have two windows and both close. The first is the public consultation, where an association or a federation of associations can actually file objections; once a regulation is notified, the practical options narrow to compliance or a constitutional challenge. The second is the signature window on the vendor contract. Sign before the regulations are final without a regulatory-change clause, and the association has silently agreed to absorb whatever the final notification does to the economics.

A practice note on how these projects actually fail

The community energy disputes that reach lawyers almost never involve the technology failing outright. They involve a generation shortfall nobody can enforce because the guarantee was "indicative"; an O&M vendor who stopped answering in year three; a committee changeover where the new committee finds no file, no warranties in the association's name, and no exit clause; and a tariff regime that moved while the payback model stood still. What I tell committees is that the two documents nobody reads are the two that decide everything: the annexure with the guaranteed generation table, and the termination clause. Every one of those failures is preventable with an afternoon of drafting and a properly minuted general body. Karnataka is genuinely opening the door to community power, and for large complexes the economics can be excellent. Walk through the door with the file built, and the project is an asset; walk through on a vendor's slide deck, and the association has bought itself a decade of committee-meeting agenda items.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Specific situations need specific counsel.

Related guides and where to get help

If this is a live problem rather than background reading, our property and real estate practice handles these matters from Bengaluru, including for clients who cannot attend court in person. These guides go deeper on the neighbouring questions:

• How to View an Encumbrance Certificate Online in Karnataka
• Tenant Eviction in Karnataka: Grounds, Procedure and the Rent Act Explained
• Karta's Power to Sell Joint Family Property: Limits