Net Metering Removal for Rooftop Solar Systems Over 5 kW Will Be Disastrous: Installers
Mercom spoke with residential rooftop installers and asked them how the proposed rules on the net and gross metering could affect their business
November 17, 2020
In September 2020, the Ministry of Power (MoP) released draft electricity rules 2020 to streamline power supply and distribution.
One of the critical points in the draft revolves around gross metering and net metering of residential rooftop solar installations. If the draft is approved, then residential rooftop solar projects of capacity up to 5 kW will fall under net metering, and projects above 5 kW will be eligible for gross metering.
Under gross metering, a consumer is compensated at a fixed feed-in-tariff for the total number of solar energy units generated and fed into the grid. The consumer then pays the DISCOM a retail tariff for the solar power consumed. Here the feed-in-tariff is always lower than the retail tariff. This is accounted for by a unidirectional or gross meter. The consumer is usually at a loss under gross metering compared to the net metering system.
Here is a case that assumes a 5 kW rooftop solar system generating 600 kWh monthly on an average installed by a residential consumer. The energy charges are calculated in the below table. The feed-in-tariff for gross metering system is considered at ₹3 (~$0.04)/kWh.
On the other hand, in net metering, the exported solar power is adjusted in the electricity bill against the energy consumed. This is accounted for by a bidirectional or net meter.
The numbers clearly illustrate that a consumer with a 5 kW rooftop solar system generating an average of 600 kWh every month incurs a cost of ₹9,975 (~$134) per quarter in the case of gross metering. If he is granted net metering, his cost reduces to ₹2,950 (~$39). Units consumed in a quarter is assumed as 2,550 kWh in this case.
This clearly explains why DISCOMs prefer gross metering over net metering. Under gross metering, DISCOMs do not lose income, but under net metering, they do.
Net metering has been the primary impediment for rooftop growth in the country. Even though the net metering policy exists in most states, implementation has been rocky. Mostly, distribution companies (DISCOMs) are vehemently opposed to net metering across states. The primary reason for this aversion to net metering is that it deprives DISCOMs of the opportunity to earn more revenue from premium consumers.
“Net metering is one of the major unique selling points (USPs) which draws people towards solar installations. If net metering is disbarred for systems above 5 kW in residential and commercial segments, it will turn away customers from solar power. Solar is considered high capital expenditure (CAPEX) and non-essential goods in the industrial segment. In states where they have taken out net metering, we are already witnessing the demand slacking,” said Sushil Sarawgi, managing director of Kor Energy.
Similar sentiments were shared by Ashish Bais, the assistant general manager (marketing) for Luminous – who said, “If the draft policy is implemented, then it will dissuade large residences from embracing solar rooftop installations because the investment in solar will make little sense. If gross metering comes in to play, it will make more sense for a household to invest in fixed deposit in a bank than invest in a rooftop installation.”
According to Ashish, with net metering, a household makes a one-time investment and, within a few years, gets its return on investment (ROI), which is not possible if gross metering is imposed.
Meanwhile, Arshi Chadha, chief operating officer at Sunson Energy, bluntly stated that the residential rooftop segment would be ruined if the draft policy is implemented, as no one will turn towards solar energy as an alternative to save power, environment, or money.
“There are draft policies specifically concerning gross and net metering which will never be implemented. The industry is looking towards those policies. I have several clients who are waiting for these policies to be implemented, so we can immediately start installations,” Arshi said.
According to Arshi, consumers are waiting for virtual net metering to be implemented, so they can immediately opt for it. Luminous and Kor Energy have already sent their suggestions regarding the draft policy to the Ministry while Sunson is currently drafting their recommendations.
According to Mercom’s Q2 2020 India Solar Market Report, the share of residential rooftop solar installation was only 3% of the country’s total rooftop installations in the second quarter of 2020. Net metering can be a significant driving force for rooftop installations in the country.
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Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.