Promoting Solar: Net metering expected to encourage the rooftop segment

Net metering expected to encourage the rooftop segment

From being practically negligible in 2012, the installed capacity of solar rooftop systems in India had gone up to 350 MW by May 2015. Encouraged by the decline in solar panel costs and the operational success of the projects that have been set up so far, the government is now planning to promote solar rooftop power generation across the country on a large scale. Of the 100 GW solar capacity target for 2022, 40 GW is being planned on rooftops. While policy intent at the central and state levels has been supportive, the major factor driving the growth of the solar rooftop segment is the rise in power tariffs. Solar rooftops have already achieved grid parity for commercial and industrial consumers in states like Maharashtra, Karnataka, Andhra Pradesh, Delhi and Odisha.

Net metering is the other major factor that is expected to encourage large-scale capacity addition in the rooftop segment, particularly among residential consumers. The net metering concept allows a consumer to generate and consume solar power within his premises and feed excess generation into the grid. The consumer then pays only for the net energy imported from the grid. Net metering provides a direct, inexpensive and eas-ily administered mechanism for encouraging the installation of small-scale renewable energy facilities on buildings.

Metering mechanism

Rooftop projects based on net metering can have two distinct types of ownership: self-owned and third party owned. In a self-owned net metering-based rooftop photovoltaic model, the rooftop owner, who is also the electricity consumer, installs the rooftop solar system, either on his own or with the help of a system supplier and installer. In the third-party ownership model, a developer owns the rooftop system and also enters into a lease arrangement with the rooftop owner. In both cases, the electricity generated by the system is first used to service the consumer’s captive load within the premises. The excess solar power is fed into the grid through a net meter, which is a bidirectional energy meter capable of registering the import and export of electricity. This net generation is then credited to the owner’s account and subsequently adjusted against imports from the grid.

In a net metering arrangement, two meters are installed: one for measuring solar generation and the other for measuring the import and export of electricity. The solar generation meter has to be installed at the generator end after the inverter to facilitate easy access for meter reading. The second meter is a bidirectional meter that can be single phase or three phase as per the requirement. Both meters have to be compliant with meter reading instruments as well as automated meter reading.

Policy landscape

In India, about 20 states have issued their respective net metering regulations, with varying stipulations on certain parameters. While states like Chhattisgarh and Rajasthan pay consumers for excess generation, Tamil Nadu and Haryana have no such rule. Most states have a capacity limitation, wherein consumers are allowed to generate only up to 90 per cent of their annual consumption and feed energy up to 10 per cent of peak capacity for a particular distribution transformer into the grid. Though this is considered important for maintaining grid operations, such a regulation could affect uptake in the near term. Most state regulations also do not specify whether the energy gener-ated from net metering-based solar rooftop systems will be eligible for participating in the renewable energy certificate mechanism.

Net versus gross metering

In India, there is an ongoing debate with regard to the long-term sustainability and cost-effectiveness of the gross and net metering arrangements. Under gross metering, customers or developers install two electric meters at the premises: one for the import of grid electricity at retail tariffs and the other for the export of solar power at feed-in tariffs (FiTs)/pre-agreed tariffs. In net metering, the excess power generated by the solar rooftop system is fed into the grid and can be used to offset the units to be consumed in future billing cycles. In addition, incentives like capital subsidy and/or tax benefits are provided to bridge the gap between the cost of solar power generation and retail tariffs for each customer category.

Gross metering is the preferred arrangement in European countries but the international experience with this system has been mixed. Although the provision of FiTs initially led to significant capacity addition, most countries were compelled to reduce preferential tariffs to lower the financial burden on utilities, considering the dramatic reduction in the cost of solar power generation. Apart from imposing a financial burden on state utilities, the gross metering arrangement also involves monitoring and verification challenges as well as difficulties in estimating appropriate FiTs on account of the declining module prices. The gross metering arrangement is not suitable for India, particularly due to the poor financial health of most state utilities.

Issues and challenges

The primary challenge with net metering relates to spreading awareness about regulations and policies at the local level. While many state governments have announced net metering guidelines, they have not done enough to educate local utility officials and the general public about them and their implementation.

Another major concern is the instability of the grid in most parts of the country. If net metering is to work effectively, the grid should be stable and available at all times. Since inverters that can flip the power to be used by a household at the time of load shedding are not available, the consumer has to bear the loss of generation during such events. This raises the question of batteries in net metering-based rooftop solar systems. If the system architecture can allow the power generated at the time of load shedding to be stored in a battery, power loss can be avoided.

However, most of the regulations released so far do not address this issue. Apart from these factors, the installation of a net meter is the prerogative of the consumer in almost all state regulations, which adds to consumer costs.

In sum, the state and central regulators are making an effort to establish a strong net metering framework. However, there are certain missing links in the value chain that could restrict the uptake of solar rooftop projects if not addressed.

Based on a presentation by Anjuli Chandra, Chief Engineer, Central Electricity Authority, at a recent Power Line conference