Maharashtra DISCOMs Adamant on Doing Away With Net Metering Regulations

The state has suggested rolling back net metering for all segments except residential


The Maharashtra State Electricity Distribution Company Limited (MSEDCL) has submitted its comments regarding the state commission’s suggestion to roll back net metering for all segments except residential.

The Maharashtra Electricity Regulatory Commission (MERC) had issued a draft in October 2019, proposing to go back to gross metering and roll back net metering for all segments except residential, which led to state-wide protests.

Solar installers in the state vehemently opposed this suggestion. They fear that if the draft regulation is approved and implemented in Maharashtra, it will result in the “complete death of the rooftop solar industry.”

The state DISCOM has now provided detailed comments justifying their decision. The DISCOM has pointed out that the objective of introducing net metering was to create awareness among consumers to promote rooftop solar and distributed generation so that the energy generated is consumed within the same premises, thereby reducing transmission infrastructure cost. After implementing net metering regulations for four years, fulfilling the initial objective of creating awareness, the DISCOM has now introduced new regulations.  According to the new regulations, all categories other than the residential category may set up the renewable energy generating system only under the net billing arrangement.  Net metering is allowed only for residential consumers with a capacity limit of up to 300 kWh, and net billing is allowed for all categories of consumers removing the earlier capacity limit of 1 MW on renewable energy generators.

Comparing the state’s regulations to other states in the country, the MSEDCL has pointed out that so far, net metering in Maharashtra was allowed for all categories of consumers for renewable energy capacity less than 1 MW but up to the contract demand or sanctioned load of the consumer.

Gujarat has allowed consumers to install rooftop solar capacity only up to 50% of the sanctioned load or contract demand with monthly banking arrangements.

Similarly, Rajasthan allows rooftop solar installations only up to 80% of the contract demand and banking within one billing cycle with a cap of less than 50 units.

Uttar Pradesh allows banking within one billing period and has made only residential and agricultural consumers eligible for net metering.

The capacity of rooftop solar in the state has reached 363 MW as of September 2019. During the financial year (FY) 2016-17, the state installed 20 MW of rooftop solar with 1,074 net metering connections. In FY 2017-18, the cumulative rooftop solar installation was 71.13 MW (5,142 net metering connections) rising to 288.8 MW (14,392 net metering connections) in FY 2018-19. In the first half of FY 2019-20, the cumulative capacity has touched 363.03 MW (20,072 net metering connections), a CAGR of 178%.

Further, MSEDCL has highlighted that of the 288.8 MW rooftop solar capacity installed as of March 2019, only 11.13 MW (4% of the total capacity), has been installed by the residential segment while the other subsidizED consumers have installed the remaining 96%.

It observed that it is the C&I consumers who are aggressively installing rooftop solar systems taking advantage of high tariff difference on account of cross-subsidies. Any further decrease in consumption by C&I (subsidizing) consumers would have a direct impact with a steep increase in the tariff of domestic and agricultural (subsidized) consumers.

As most high-end consumers are opting for rooftop systems through the net-metering arrangement, it then reduces the ability of the distribution licensees to subsidize low-end consumers. MSEDCL has also calculated a loss of revenue of about ₹2.24 billion ($31.65 million) because of the implementation of net metering regulations until March 2019, which will result in the rise of tariff for the other consumers of MSEDCL creating an imbalance in the cross subsidy built into the tariff structure.

MSEDCL also draws attention to the point that the return of equity (RoE) for C&I consumers is 40% due to net metering as compared to the maximum RoE of a generating company regulated by the Electricity Act 2003. In the MERC tariff regulations of 2019, the RoE provided for a generating company is only 14%.

MSEDCL also notes that the cost of infrastructure is recovered through wheeling charges per unit basis. The balance solar energy generated during the day by net metering consumers is fed into the grid due to which the DISCOMs have to back down the thermal generation and pay the fixed cost to them. In the evening, when the same consumers draw power from the grid, the DISCOMs have to keep the network and generators ready to cater to the demand. The net metering consumers use the grid as a storage system but loading all the balancing costs like fixed cost and infrastructure costs on other consumers.

From the technical point of view, MSEDCL pointed out that with many rooftops renewable energy generating systems, it will be difficult for the utilities to monitor the stability of the grid.

Commenting on the specific clauses of MERC’s draft order, MSEDCL has noted that even the provision of allowing net metering for residential consumers only with netting off of the first 300 units would have a significant impact on the cross subsidy structure.  Taking, for example, a rooftop solar consumer with a total consumption of 400 units per month, the loss of cross subsidy is calculated at ₹605 ($8.5), and the reduction in energy bill is ₹2,764 ($39). So, the MSEDCL finds it prudent that residential consumers are also are billed through gross metering as it provides the same RoE for all consumers irrespective of the tariff slabs in which they fall.

MSEDCL also suggests the renewable energy generation capacity be limited to 50% of the sanctioned load or contract demand for consumers under a grid-connected rooftop system instead of a net billing arrangement with no limit. This is to ensure that the power generated under this regulation is consumed in the same premise and not fed into the grid at low-tension (LT) or high-tension (HT) level, which would otherwise result in wheeling losses of 12% and 9% respectively.

The MSEDCL has also recommended the levy of wheeling charges and additional charges on the offset units of the consumers to completely recover the fixed cost. It goes on further recommending the application of wheeling charges and loss on the net metering consumers on the total banked units for recovering the distribution infrastructure cost.

MSEDCL has asked for the provisions of the MERC net metering regulations 2015, be applicable only for three years from the date of the applicability of the new 2019 regulations. After the three years, it is suggested that the regulations prevailing at the point of time be applicable. In case of enhancement of the renewable energy system already installed by the consumer under the 2015 regulations, it recommends the new 2019 regulations be applied.

Previously, as the draft received a lot of flak, Chandrasekhar Bawankule, the state energy ministry, had requested the MERC to discard the proposed draft regulations.

In a recent letter to Union Power Minister R.K Singh, Nitin Gadkari said that net metering should be optional along with net billing until the country’s solar target is achieved.

Image credit: By AleSpa – Own work, CC BY-SA 3.0