An industries analysis on net-metering and its challenges
Solar is an important source of renewable energy. Given India’s major dependence on imported fossil fuel for its energy needs, increasing renewable share especially solar in the energy mix would be a significant contributor to India’s goal of environment sustainability and providing energy security.
The market potential for solar rooftop distributed plants in India is approximately 124 GW and the central government has set up an ambitious target of installing 40 GW of rooftop distributed solar by 2022. But the installed capacity has only crossed the 1 GW mark till date. Hence, for quick deployment of the remaining capacity, the supporting market mechanisms must be robust and streamlined, believes Sanjeev Aggarwal, Founder & CEO, Amplus Solar. He says, “Net metering using solar has the potential to drive widespread implementation of distributed generation by incentivising end-users to adopt localised power generation. In addition to providing a reliable and sustainable source of power, it helps the end consumers save money on electricity and the distribution companies to reduce system losses since consumption are at the point of generation.”
Sharing his views on why net metering is essential for India to achieve energy security Hartek Singh, Chairman & Managing Director, Hartek Group says, “Net metering holds the key to achieving national energy security by 2022. It will help stabilise the national, regional and state grids, provide financial relief to distribution companies (discoms) through consumer default risk mitigation and reduction of Aggregate Technical and Commercial (AT&C) losses and lower the per-capita carbon footprint.”
The biggest advantage of solar is that it can be produced at the point of consumption. When it comes to solar power, you have to either use it or lose it. There are only two ways to prevent this loss. You can either feed the excess power to the grid (Net metering) or store it (battery storage). While battery storage is a costly proposition, Net metering provides a compelling reason to electricity consumers to opt for solar power.
He adds, “With Net metering, consumers have the option of using the solar power produced by them as and when they need it. This banking facility offers a huge advantage to the rooftop solar segment. Consumers can maximise the size of their solar installations to produce more during summers, feed excess electricity to the grid and draw it back during cloudy days. By doing away with the need for batteries, Net metering has reduced the associated capital and maintenance costs appreciably, thus resulting in better returns on investments for solar.”
As consumers are charged only for the net energy drawn from the grid, the solar power plants not only helps them reduce their energy costs but also enable them to earn money from solar power. Today, net levellised tariff from solar is lower than the retail cost of electricity in most states.
As per Kunwer Sachdev, Managing Director, Su-Kam for India to achieve energy security the country must have storage systems and for storing energy net metering is necessary. He comments, “To begin with, energy security of India is essential because the earth’s fossil fuels will get exhausted in the near future and renewable energy is our only way ahead. We have various sources of renewable energy the most abundant being solar power. But here also the challenge is the storage of this power. To achieve the energy security of India we need to store this solar power to make it available in times of emergency. Here is where net metering comes into picture.” As we know the concept of net metering revolves around feeding the ‘excess power or unused power’ generated by the solar power back to the electricity grid. This way we are not wasting solar power and ensuring a massive source of electricity generation other than the grid power.
“It is on-grid and grid tie inverters play a significant role in achieving the energy security target in India,” adds Sachdev.
Net metering is essential for a location where the time need of power load is in off sun hours is different than the generation time of the day. Also places where 24/7 power requirements is not there and holidays are there, net metering is very essential, believes Krishnan Rajagopalan, Head –Solar Business, Anchor Electricals Pvt. Ltd. Like for example residential complexes, schools, offices etc. It is very essential to run the solar plant fully without stopping like load shedding or clamping the plant generation. “The power is free from sun; we have to tap it fully. This will help in efficiently operating the plant and also move toward energy security,” he adds.
“Net metering considered as one of the most powerful tool to achieve energy security targets of India by 2022, says Dr Sanjiv Kawishwar, Sr. Vice President, ReGen Powertech Pvt Ltd. It is useful for incentivising users to adapt localised generating power through technology such as solar, reducing energy bills, stabilising the national and regional state grids, motivating consumers to utilise renewable energy, enhancing investments in renewable energy technologies, creating an interface that can significantly reduce the rising carbon footprint of our country and cut down the per capita energy footprint, providing financial relief to the distribution companies through consumer default risk mitigation.
Poor Net metering policies posing challenges
Explaining whether poor net metering policies are posing major challenges for solar power Aggarwal says, “There are various factors posing a challenge to the rise of solar in India and net metering is just one of them primarily for distributed generation. Unfortunately, despite central government’s best efforts, Net metering has not been readily adopted by all states.”
Further he observes, “Lack of financial incentives is restricting the end consumer’s adoption of solar rooftop through net metering since in many states, the buying from the discom and selling back to the grid tariff rates are different. With buying rate higher in most states, the customer is at a virtual loss by investing in solar net metering project.”
Aggarwal points out, “Grid unreliability is another issue hampering solar rooftop systems since the electricity generated using solar cannot be used in case of a grid outage due to anti islanding protection.”
Discoms are reluctant in adopting net metering guidelines due to loss of business/ profitable customer base. Net metering is beneficial to customers paying high tariffs typically commercial and industrial users and they are also profitable to the discoms.
Singh says, “One of the biggest challenges in the way of penetration of rooftop solar is poor implementation of Net metering policies, which vary from state to state. Discoms purchase power at wholesale rates and sell it at retail prices. The difference accounts for the cost of distribution, line losses and profit. As per Net metering policy, discoms are supposed to offer consumers a higher rate for solar power fed into the grid. So, they view solar power as a loss making proposition. Net metering policies need to be formulated in such a way that discoms start viewing solar power as a complementary source of electricity.”
Poor net metering policies are discouraging the solar sector believes, Rajagopalan. He says, “Poor net metering policies are discouraging solar, particularly in smaller project capacities. But this needs to be changed. Banking and net metering is very essential for this sector to grow. We are sure the central government is working many initiatives through state government to address this and different states have come out with their net metering policy. But a uniform net metering policy initiative will drive this market more rapidly.”
On the other hands Sachdev says, “Yes. We have seen that because of lack of proper net metering policy we were not able to complete some major net metering projects in the last few months. This has caused two primary issues. First- Since the time we were supposed to install the net metering system till date we have wasted that amount of solar power that could have been used to feed power to the grid. Secondly the meters installed in our homes work only unidirectional as compared to the net meters that work bidirectional. Due to this when net meters are not installed due to conflict in net metering policies then on the weekends or on the times when solar is not used to run the load this meter will add up the solar units in the bill, thus resulting in higher electricity bill in spite of solar system installed.”
The government is taking steps to improve the net metering policy. MNRE has given major discounts and incentives for the discoms so that the policy is placed efficiently.
Following are few point shared by Dr Kawishwar on whether poor Net metering policies posing major challenges for solar sector;
- If the selling and buying are at the same tariff rate then it is called Net metering.
- The actual average tariff rate varies widely from state to state due to difference in tariff policies
- In order to influence the voters the electricity tariffs are purposefully and artificially kept low for residential consumers and for agriculture consumers
- Residential consumer in the highest consumption range may get benefit as they can sell at a profit and recover their investment within a few years
- Distribution companies recover the revenue lost due to subsidy for residential users by levying extra charges on the industrial segments
- If the ‘cross subsidy’ is removed then the tariff rates may become more realistic and Net metering for all users will become financially viable.
Is net metering a curse or a blessing for solar sector?
Net metering if properly implemented will prove to be a blessing to the solar (decentralised) sector due to the following reasons:
- Reduced system losses since the consumption is at the point of generation.
- Helps provide monetary savings along with environmental attributes.
- Contributes towards grid stability.
- Reduces need for huge tract of land for upcoming power infrastructure.
- Provides energy independence and sustainability.
“Net metering adoption is not a single standing solution such as enforcing RPO requirements but would need a combined effort in terms of making the regulatory environment supportive, in-depth study of grid infrastructure to support banking, long term financial benefits for distribution companies and comprehensive guidelines for users and discoms,” Aggarwal.
As per Rajagopalan net metering is a boon to the solar sector. It is a very essential component of the evacuation of solar power which is generated. As solar generation is not in our control, we should utilise the energy fully and not under-utilise the plant, just because there is no load at the building. We should have net metering policy and allow the power to flow to the grid and adjust the same in the monthly utility bill using an import – export net metering arrangement. This system should be automated with software so that human intervention and manual errors are avoided and the process is smoothened.
“Solar power costs have been dropping consistently and grid parity has been achieved in most states. A proper framework and effective implementation of Net metering policies can go a long way in enhancing the appeal and encouraging the adoption of solar power,” says Singh.
As per Dr Kawishwar net metering can be a blessing to the solar sector if grid modernisation at local level is being done in the form of net metering. He suggests:
- Policy and commercial aspects are weaved in a such manner that it helps to make net metering successful.
- Narrative supporting the net metering should convey its benefits to consumer instead of stating that it helps to reduce transmission losses.
On being positive about net metering Sachdev says, “Net metering is definitely a blessing as long as we are using it, till we are not using it’s a curse resulting in waste of the much-needed solar power in this era.”