Future Uncertain but Open Access and Net Metering Projects Still Attractive Despite ALMM

The uncertainty on module supply and prices could adversely impact such projects


The widely expected relief for net metering and open access projects has failed to materialize after the September 30 deadline was allowed to expire without an extension from the government. The developers have to mandatorily use domestically manufactured modules from the Approved List of Models and Manufacturers (ALMM) from October 1.

However, this has not dampened the ongoing or planned projects because the savings on power costs for consumers remain attractive despite being restricted by the policy.

A top executive from a leading developer said, “Even if the extension doesn’t come through, the commercial and Industrial (C&I) consumers will continue with open access. With ALMM coming into force, the energy cost from these projects will go up by ₹0.30 (~$0.0036)/kWh-₹0.40 (~$0.0048)/kWh, but the consumers will still stand to save around ₹1 (~$0.012)/kWh-₹1.5 (~$0.018)/kWh compared to DISCOM retail tariffs.”

Recently, the Ministry of New and Renewable Energy (MNRE) clarified that open access and net metering renewable energy projects that have applied for approval before October 1, 2022, will not come under the purview of the Approved List of Models and Manufacturers (ALMM). But the move is limited in its scope.

The Ministry also stated that the ALMM would not be applicable for behind-the-meter solar power projects used for captive consumption by a consumer or group of consumers.

Despite the continued cost-effectiveness of open access and net metering projects to customers, the introduction of ALMM could lead to a longer payback period for projects and dent developers’ margins due to uncertainty around the supply and pricing of domestic modules.

“We will be forced to buy from India, but we don’t have the required module manufacturing capacity here. This will lead to the slowing down of the commissioning of projects, including open access projects,” Rahul Tyagi, GM-Business Development at Amp Energy, said.

The domestic manufacturing capacity compared to demand is heavily mismatched, according to Mercom’s Q2 2022 India Solar Market Update.

Some developers warned that consumers should not be taken for granted for incurring expenditure on these projects even if the current calculations show savings on power bills, because serious roadblocks could be in the offing if module prices reach unviable levels.

Sushil Rajguru, Manager-Business Development, Skeiron, said: “It is too early to assess the impact of ALMM order on open access projects, but if the prices go up, it will affect the ongoing projects. The demand for open access may also decrease, as the C&I consumers might prefer waiting for the prices to go down. For developers, the payback time will increase, which is not a good thing.”

Developers have petitioned the government and even the Delhi High Court for an extension on the ALMM requirement for net metering and open access projects. They point out that the policy has enriched the manufacturers at the cost of developers and consumers.

“The manufacturing companies are importing the cells and assembling them here. For cells, you have to pay only 25% duty; on modules, you have to pay 40%, which goes to around 45% after all the taxes,” Tyagi said.

Net metering and open access projects are in the same situation. Developers aren’t concerned about a slowdown in orders for now, but they feel the immediate future isn’t so secure.

Hitaksh Sachar, Director at Asun Solar Power, said, “Even if the ALMM requirement had got extended, it would not have had an impact on this sector because the Chinese modules after BCD had become unviable, especially with an increasing number of projects being executed.”

Harinarayan, Managing Director, U-Solar said, “If the module prices continue to climb, consumers will not opt out of net metering. They will be sharing a portion of the increase in costs alongside developers while manufacturers benefit.”

Open access and net-metering projects have been popular among consumers since they provide a viable alternative to procuring power from DISCOMs. However, the mandate to procure domestic solar modules without choice and the resultant uncertainty could be a hurdle for these projects making them unattractive for investments.