India’s New Net Metering Limit Risks Stalling Progress on Rooftop Solar Target: IEEFA

A new regulation that excludes rooftop solar systems over 10 kW from net metering will stall adoption of larger installations in India, undermining progress towards the government’s rooftop solar target of 40 GW by 2022, said IEEFA and JMK Research & Analytics in a joint analysis.

According to a new briefing note, a provision in the Ministry of Power’s new rules for electricity consumers which mandates net metering for rooftop solar projects up to 10kW and gross metering for systems with loads above 10kW risks will likely make rooftop solar commercially unviable for big residential and commercial and industrial (C&I) consumers.

“Currently, India only has around 6GW of installed rooftop solar capacity, the majority of which has been developed by C&I consumers. So the very consumers who are driving rooftop installations in India are also the ones most likely to be deterred by the 10kW limit on net metering,” says co-author Vibhuti Garg, Energy Economist, Lead India, at the Institute for Energy Economics and Financial Analysis (IEEFA).

“India already has a long way to go to meet its critically important 40GW target, and if limiting net metering to 10kW makes the rooftop solar space unattractive for C&I consumers, it is unlikely that we will be able to achieve that target.”

Garg and co-author JMK Research Founder Jyoti Gulia analysed the net and gross metering tariffs payable across leading states. They found gross-metered consumers are compensated for the export of solar power to the grid at rates of Rs 2-4/kWh. However, current rooftop power purchase agreements (PPAs) signed by Tier 1 developers have tariffs in the range of Rs 3.5-4/kWh.

“Developers and corporate consumers would consider any tariff lower than the current PPA tariff unviable,” says Gulia. “If consumers have to buy electricity from discoms at a high tariff and at the same time the feed-in tariff they receive is low they will have no incentive to set up rooftop solar at their premises.

“Also, under gross metering, corporate consumers would not benefit commercially from using the power generated from their own system for self-consumption.

“Both C&I consumers and developers will find their payback periods will be much longer and the investment will become riskier, delaying the roll-out of this strategically important, cost-effective technology solution.”

The report further added that, Discoms, on the other hand, will notionally benefit from the shift to gross metering for installations with loads above 10kW, paying less for the same amount of energy. Except those benefits will be dissipated because there will be no material new investment by C&I customers.

The note points out that although it is up to states to implement the central government’s restriction on net metering, many are likely to do so to address the loss-making discoms’ concerns over high-paying C&I consumers shifting to rooftop solar, the report said.

In their note, the authors propose a net feed-in mechanism as a “win-win” solution for all the stakeholders, explaining that it would not have a major impact on discoms’ revenue and would still be beneficial for the consumer.