Why net billing systems will kill Maharashtra’s rooftop solar market

Mumbai: The Maharashtra government’s proposal to switch from net metering to net billing for commercial and industrial rooftop solar power projects is likely to sound the death knell for a sector already struggling to take off.

Companies in the rooftop solar power segment are protesting draft regulations recommending this switch, saying it kills the business case for setting up rooftop solar power solutions.

The draft changes the mechanism under which power consumers are charged for the grid electricity that they consume. In a grid-connected rooftop solar unit, a distribution company’s consumer generates his own power from the rooftop unit during the day, supplying excess power to the grid. When the solar unit isn’t operational, the consumer draws power from the grid instead. Under the net metering system, the energy produced by a rooftop solar unit is set off against the energy supplied to the consumer, and the difference is billed at a set tariff. The net metering system provides a financial incentive to power consumers to generate and maintain their own electricity supply, and reduces dependence on the grid. Nearly all Indian states have net metering policies that encourage high-tension electricity users to take advantage of these policies, even though on-ground implementation so far has been patchy.

However, the draft regulations from the Maharashtra Electricity Regulatory Commission (MERC) for grid-interactive rooftop renewable energy wants the state to switch to net billing (or gross metering), rolling back net metering facilities for all sectors except residential.

Under net billing, the consumer supplies his power to the grid at a fixed grid tariff while the consumer draws power from the grid at a higher retail tariff, putting the state-run discom at a financial advantage over the consumer.

“Under the draft amendment, there is now no reason to install rooftop solar power and no way to save money on the electricity bill,” Animesh Damani, partner at Artha Energy Resources, a Mumbai-based renewable energy consultant, told Mint.

Artha Energy is planning to set up a rooftop solar business and Damani says if the draft regulations become state policy, it makes Maharashtra a less attractive market for rooftop solar consumers. “The commercial and industrial clients won’t install rooftop solar as yet unless they have continuous consumption, and that is not the reality. With net billing, the government is saying that consumers should invest to set up the unit and sell power at a lower tariff to the grid, which the grid can then sell back to you at a higher tariff. This is going to be terrible if Maharashtra adopts this. Uttar Pradesh has already removed net metering and now, no new rooftop solar projects are coming up there and vendors have stopped operating in that market. We will fight this draft from MERC tooth and nail.”

Maharashtra has 22,604 high-tension power consumers, of which only 1371 operate under the net metering policy, according to Artha Energy. The state has massive potential to encourage rooftop solar projects but if commercial and industrial units do not see a financial benefit from setting up their own generation units, they will instead choose to continue drawing power from the grid.

The Narendra Modi government targets setting up 175 gigawatts of renewable energy by 2022, of which the target for rooftop solar projects is 40GW. So far, actual rooftop solar installations across the country stand at just above 4GW.

Andrew Hines, co-founder, CleanMax Solar, told Mint: “Net metering has been a cornerstone of the rooftop solar market in India and around the world. Any effort to dilute or weaken net metering rules will certainly have a negative impact on growth in this industry. Any effort to restrict or to water down net metering regulations would be inconsistent with India’s stated goals of increasing solar capacity, and rooftop solar capacity in particular. Rooftop solar projects have clear benefits over other forms of power generation, in terms of air pollution, land use, and transmission losses. However, without net metering, many such rooftop solar projects would not be financially viable.”

The state has invited public comments on the draft policy by 18 November.

Source: Live Mint