Net Metering Policy Continues to be a Drag on India’s Rooftop Solar Sector
Policy design, implementation and inconsistencies across different states pose significant challenges for rooftop solar
Net metering was introduced in India as a measure to make distributed renewable energy more accessible and economical for electricity consumers across the country. Net metering works by calculating the difference between the export of power generated by the consumer from a rooftop solar installation, and the import of power from distribution companies (DISCOM). Consumers are then compensated for the surplus power generated at a price determined by the state.
However, implementation has been rocky on the ground. Many states are hesitant to provide a robust environment for rooftop solar, as DISCOMS do not want to sacrifice premium customers who pay a high tariff. This makes India’s net metering policy highly inconsistent. These inconsistencies are currently the biggest challenge for rooftop installers and customers. Depending on the state, net metering policies can restrict the development of rooftop solar based on system size, connection type, metering type, developer model (OPEX/CAPEX), and approval time and procedure.
One of the larger hurdles is system size as most states have an upper limit (usually 1 MW) on the size of a rooftop solar project. Although a 1 MW rooftop project is relatively large, the size limit sidelines a large number of commercial and industrial consumers from installing rooftop solar to meet their power needs. However, some states such as Odisha do not have a maximum cap on a commercial rooftop project size.
Another challenge of the net metering policy is the various business models under which developers must operate in the state. For example, in Gujarat, consumers are not allowed to choose a third party owned installation. This makes things difficult not only for consumers who want a rooftop system and cannot invest their own capital, but also for rooftop independent power producers (IPP). Almost all states provide for third party owned or an OPEX based rooftop solar projects in their policy.
The approval process is yet another challenge for net metering policies in many states. In Karnataka, Tamil Nadu, Maharashtra, and Gujarat, for example, developers face lengthy approval processes which can last anywhere between three to six months. In contrast, the approval process in Delhi, Andhra Pradesh, Telangana, and Rajasthan are more streamlined and takes anywhere between 25 days to 30 days.
Vishal Toro, senior manager at Fourth Partner Energy, expressed concerns with India’s net metering policy, “The policy is in place on paper in most states. However, on the ground the implementation is poor,” Toro said. “In many states, DISCOM officers are not even aware of what net metering is, therefore on many occasions we find ourselves spending a lot of time and effort educating them.”
On being asked about challenges with respect to the approval process, Toro added, “In Tamil Nadu we face many hurdles for projects that have a capacity of 100 kW and above, including being required by the DISCOM to forward the project file to the highest level in the state for approval. The state is also not permitting net metering connections for HT consumers.”
In some states, developers are forced by the local authorities to approach the chief electrical inspector (CEIG) for safety approvals for projects that are not even required to be approved in the first place. Some developers have also raised concerns about the time taken to secure the net meters, with some DISCOMS taking up to two months to provide the bi-directional meter.
Recently, Maharashtra State Electricity Distribution Company (MSEDCL) proposed in a petition to shift from net metering to gross metering, a move which could make rooftop solar unviable for many consumers. Currently some states, such as Karnataka, Andhra Pradesh and Uttar Pradesh, allow consumers to choose between a net metered and a gross metered system.
Andrew Hines, co-founder of CleanMax Solar, a rooftop solar developer, said MSEDCL’s proposal to replace net metering with gross metering is consistent with its pattern of trying to discourage rather than encourage rooftop solar adoption. “MSEDCL’s argument is that under net metering, consumers are supplied to the grid at the prevailing grid tariff, and not at a competitive wholesale price. In reality, the vast majority of rooftop solar projects are still net importers of power from the grid every month,” Hines said. “Net metering is used merely to balance the variability of power generation and consumption, which does not cost the DISCOM anything. With a rooftop solar plant, a large power consumer merely reduces the power it draws from the grid. In fact, the financial impact to MSEDCL is identical to improving energy efficiency, which everyone would agree is a laudable aim.”
Hines also suggested that gross metering can be a good policy to promote residential rooftop solar, as is the case in the U.S. and German examples cited by MSEDCL in its petition. “If the policy is well formulated and consumers trust the DISCOM to keep gross metering rates fixed for 25 years, gross metering would be a good way to encourage the residential segment,” he said. “However,” Hines noted, “commercial and industrial consumers, who make up most of the growth in rooftop solar today, don’t want to supply power to the utility. They want it to generate their own power, to reduce their power consumption. So why not keep both gross and net metering policies and give the option to the consumer?”
With many DISCOMs, including MSEDCL, failing to meet their RPO obligations and instead buying RECs at a high cost to taxpayers, Hines believes states should be working to promote rooftop solar by providing consumers more options. “Unfortunately, this proposal by MSEDCL does the opposite, and if implemented, the effect would be to drastically reduce the number of rooftop projects to be installed in the state,” he said.
Some states are actively working toward improving the process for net metering approval, including Karnataka which recently announced it will not require CEIG clearances for projects below 1 MW. This step, albeit a small one is in the right direction for the state.
To meet the lofty target of deploying 40 GW of rooftop solar by 2022, it is important for the central government to take measures to encourage state governments and DISCOMs to standardize rooftop policy and approval process across the country.
Shaurya is a staff reporter at MercomIndia.com with experience working in the Indian solar energy industry for the past four years in various roles. Prior to joining Mercom, Shaurya worked with a renewable energy developer and a consulting company. Shaurya holds a Bachelors Degree in Business Management from Lancaster University in the United Kingdom.