Rooftop Solar PV: A Win-Win Situation for Discoms

In its commitment to renewable energy, India had set an ambitious target of setting up an additional installed capacity of 175 Gigawatt (GW) through renewable energy by 2022. Of this target, 100 GW has been apportioned for solar photovoltaic (PV), out of which further 40 GW target has to be met through roofop solar (RTS) PV systems. With the falling capital cost of installation leading to solar tarifs falling signifcantly over the years, there has been a dramatic growth in this sector.

While the solar PV industry in itself has seen overall growth, the rooftop solar PV segment is expected to achieve momentum in the coming years. Of the 40 GW to be installed by 2022, around 3.58 GW has been installed so far by March 2018. This number is mainly due to some distribution companies (Discoms) showing inhibition in promoting rooftop solar PV systems, fearing revenue loss. These Discoms also anticipate technical and operational challenges from such systems. Further, due to the small size of solar rooftop projects and issues of payment security, financing for these projects is not available easily.

However, the solar roofop systems are actually quite benefcial to the very Discoms wary of them.

MANAGING DEMAND

Industries, which are Discoms’ highest paying customers, are already moving to open-access (mostly ‘short-term’ open access) system to buy cheaper electricity, irrespective of rooftop solar PV coming into the picture. Under open access, large consumers have access to the transmission and distribution (T&D) network to get electricity from suppliers other than Discoms. Distribution utilities incurring high Aggregate Technical & Commercial (AT&C) losses due to large amount of rural/non-paying consumers would be affected the most by this transition as they would lose a significant share of their revenue stream. Discoms also feel that the charges paid by open-access consumers are not sufficient enough (as they are exempted from certain charges) for them to cross-subsidize their low paying consumers.

If these open access consumers shift to rooftop solar PV for their electricity needs, the electricity demand of utilities would drop. In turn, these Discoms would not need to buy expensive electricity from the open market to meet their peak demand. Thus, promoting such customers to go solar would in their best interests.

Motivating their low-paying consumers (that are mostly residential) to implement roofop solar PV at their premises can also help the distribution utilities ofset the cross-subsidy burden to some extent. Currently, this is being practiced only by some utilities (such as BRPL, DGVCL, Torrent Power and MPCZ) in the country. It would beneft both the consumers and Discoms, especially in areas where the solar tarif is lower than utility tarif. At the end, they would be able to retain all their customers.

CUTTING TRANSMISSION LOSSES

The Discoms’ AT&C losses would be reduced with the help of rooftop solar PV systems as the power would be generated on consumer’s rooftop itself. Such systems can, thus, help manage peak demand during the day. Such systems can also be utilized in meeting the demand locally post sun set, by storing any excess energy generated coupled with electric vehicles (EVs) and battery energy storage systems (BESS) near their premises, considering economic feasibility of such systems. They can thus help utilities reduce sudden grid loading (also known as duck-curve effect) and optimizing the scheduling of costly power through power stations or, power exchange which, thereby, reduces their power purchase costs.

COST SAVINGS

Roofop solar PV systems can also help reduce commercial losses, especially among rural/ non-paying consumer categories. Along with these benefts, such systems installed on the roofops of consumers, which are non-obligated entities, would also help Discoms’ meet their renewable purchase obligation (RPO) targets and in turn claim the benefts of the same.

As there would be less power flowing through the distribution network, network congestion and loading would also come down, thereby reducing the network burden. This, too, would help the utilities defer some of their capital expenditure as the infrastructure would last longer, and reduce operation and maintenance expenditure. As Discoms are part of “pass-through” business, all the monetary benefits could be passed on to the consumers through a reduced Aggregate Revenue Requirement (ARR) and thereby, reduced utility tariff.

A SUSTAINABLE BUSINESS MODEL

For Discoms to promote the use of roofop solar PV systems and make the best use of the same, TERI proposes a ‘utility-based’ business model. It is based on demand aggregation and agreements between various parties, keeping the utility as the ‘key-anchor’ party for the implementation in their licensee areas.

The Discom can aggregate the demand for rooftop solar in their licensee area through a centeralised platform and allocate the project to a developer through a competitive bidding process. The advantage of aggregating the demand would be increased project size and reduced risks of identifying locations/ sites, which would lead to reduced up-front investment cost for the developer and lower electricity tariff for the consumer. A similar approach was carried out with the Discoms in Delhi (BRPL1,2) and Surat (DGVCL and Torrent Power along with SMC3,4) with the help of TERI to implement their rooftop solar programme. Madhya Pradesh Urja
Vikas Nigam Limited (MPUVNL) saw the lowest bid for the development of 8.6 MWp of grid-connected rooftop solar under RESCO model; it was observed at a record low of ₹1.38 /kWh5 for central government buildings (CPSUs). This was because of the result of pre-identified locations for the project and huge subsidy (about 43% of capital cost) from central and state government.

Discoms can allocate the project with aggregated project size to a selected developer under RESCO mode via competitive bidding process. Discoms can enter into agreements with consumers and developers respectively to ease the financial process. Based on these agreements, consumers can pay the Discom for their installed systems, which would in turn pass this on to the developer, thus ensuring timely payments and increasing the bankability of such projects. For this arrangement, the Discom can charge a service fee and have a financial incentive to implement rooftop solar in their licensee areas.

Consumers can choose to go for either net metering or gross metering connection for the grid connectivity of these systems. Under net metering connection, Discoms can bill the consumers for electricity consumed from the grid and rooftop solar system; the latter could be considered as a part of the payment for the system to the developer. Under gross metering connection, Discoms can bill consumers on their consumption and pay for the electricity exported to the grid; the payment for the system could be included as a part of the bill or the system can be installed on roof-lease arrangement, where the owner is paid lease for utilizing its rooftop by the developer and Discom.

India is looking at achieving an ambitious target of 40 GW from rooftop solar by 2022. In order to achieve the target, involvement of all the stakeholders is required to accelerate the growth of this sector. Roofop solar provides various benefits to the Discoms, by reducing their technical, financial and operational burden. Discoms, thus, need to undertake a more anchoring role in the implementation of solar rooftop projects within their licensee areas. Looking into more innovative approaches in rooftop solar implementation, such as Discom-based business models, consumer targeted awareness and demand aggregation can help the Discoms overcome any challenges faced in promoting rooftop solar. This would not only help the Discoms, but would be beneficial for all the stakeholders involved in the sector. This might provide the overall push to this sector which is needed to achieve the targets and also avail the benefits of this clean and green source of energy.

1 Garud, S S (2018, May 8). Solar rooftops: A Delhi neighbourhood takes the leap. Retrieved from The Energy and Resources Institute: https://www.teriin.org/blog/solar-roofops-delhi-neighbourhood-takes-leap 2 https://www.solarbses.com/#
3 Datta, A. (2018, March 7). It takes a village – Surat’s united effort to embrace solar power. Retrieved from The Energy and Resources Institute: https://www.teriin.org/interview/ it-takes-village-surats-united-effort-embrace-solar-power 4 http://suratsolar.suratmunicipal.gov.in/#
5 Kabeer, N. (2018, October 5). Lowest Tariff Drops to ₹1.38/kWh in Madhya Pradesh’s 8.6 MW Rooftop Solar Auction. Retrieved from Mercom India: https://mercomindia.com/l1-tariff-1-38-mp-solar-rooftop-auction/

Source: Mr Rishabh Sethi, Consultant, Electricity and Fuels Division, The Energy and Resources Institute (TERI), New Delhi; Er. Alekhya Datta, Fellow & Area Convenor, Electricity and Fuels Division, TERI, New Delhi.