Net-metering is essential for India, but here is why it’s failing – [Part 1 of 2]

Net-metering can potentially drive widespread implementation of distributed generation by incentivising end-users to adopt localized power generation through technologies such as solar. In theory, net-metering is the proverbial silver bullet designed to help India achieve greater energy security through generation at point of consumption (distributed generation). In addition to helping consumers reduce their energy bills, it is also supposed to help stabilise the national, regional and state grids, provide financial relief to the distribution companies (DISCOMs) through consumer default risk mitigation and reduction of AT&C losses, and help cut down the per-capita energy footprint. Unfortunately solar adoption through net-metering has not picked up, even in 12 states and union-territories where it has been implemented. Both DISCOMs and end-consumers are reluctant to adopt net-metering. This article is post 1 of 2 on this matter and discusses the consumer side of the issue. [Refer – part 2 – DISCOMs side of the story]

  • Net-metering is crucial for India if it wants to achieve energy security by 2022
  • Improvement in inverter technology and innovation in financial incentives is required for large scale adoption of net-metering
  • While technological improvements will enable market growth, financial innovations will drive the growth

blog 21.4.15

There are two main reasons for the disappointing adoption of net-metering by the consumers: the tariff structure (a policy matter) and grid-reliability (a technical concern). Both issues are relevant for the residential, commercial and industrial segments. In this post, I have focused on the residential segments since it exemplifies the issues well.

Reason 1: Tariff structure (a policy issue)

Net-metering allows customers who generate their own electricity from solar to feed unused electricity back into the grid and be compensated for that. If the energy supplied by the consumer to the grid (selling) is at a special, usually higher, tariff rate than the one at which electricity is bought from the grid (buying), then it is called a “feed-in-tariff”. However, if the selling and buying are at the same tariff-rate (usually the buying rate), then it is called net-metering. And herein lies a problem.

Residential (and agricultural) tariffs are purposefully and artificially kept low (through subsidy) to influence the voters (e.g. Delhi elections). The actual average tariff rate varies widely in each state ranging from approximately Rs. 2.8/unit in Chhattisgarh to Rs. 6.15/unit in Maharashtra for MSEDCL consumers. In the highest consumption slab, they can even reach Rs. 11/unit in certain states. Residential rooftop solar PV systems today, on the other hand, produce electricity at a fairly constant cost across the country of approximately Rs. 10/unit – reducing yearly as system prices drop.

Thus a net-metering customer in Chhattisgarh will have to sell electricity at a loss of almost Rs 7/unit. Only residential customers in the highest consumption of some states benefit as they can sell at a profit and recover their investment within a few years.

DISCOMs recover the revenue lost due to subsidy for residential and agricultural users by levying extra charges on the commercial and industrial segments. If one removes this “cross subsidy” then the tariff rates will become more realistic and net-metering for all users will make more financial sense.

However, since there is no sign of change in vote gathering mechanisms and thus removal of cross subsidy in the near future, feed-in-tariff comes across as a possible solution. Unfortunately, feed-in-tariff is just not possible in India is because of the simple reason that the DISCOMs are in financial deficit – they have no money to pay the users. Lack of viable financial incentives is, thus, restricting end customer’s adoption of net-metering.

For net-metering to make financial sense, the solar industry, its financiers and the Indian government will have to introduce innovative financial incentives (may be such as tax-credits) to make choosing solar through net-metering easier for consumers.

Reason 2: Grid reliability (a technical issue)

One of the key requirements for any energy source to connect to the grid is the availability of “anti-islanding protection”. Anti-islanding protection is a way for the inverter to shut itself off and stop feeding power into the grid, when it senses a problem with the power grid, such as a power outage. This requirement is crucial because when problems arise with the power grid, it is assumed that workers will be sent to deal with it, and the power lines need to be completely safe – i.e. not have electricity flowing from all the nearby PV grid-tie systems – so that the workers can fix them without putting their lives in danger.

Most of the states in India, unfortunately, suffer from frequent power outages, mostly due to load shedding rather than problems in the grid’s infrastructure. Thus when the grid shuts off, the solar PV inverter will also turn off completely, preventing the owner from using the generated energy for themselves. With high unreliability of the grid, a lot of the electricity generated by the solar PV system will be wasted. This is a key reason for consumers to adopt solar with net-metering.

The anti-islanding protection is an essential safety feature that cannot be removed. Thus, the solution is technological innovation. Inverter manufacturers will have to make their inverters capable of cutting off the connection to the grid in case of grid failure, while still being able to operate (acquire reference voltage) and provide solar energy for use. If such a provision is available then net-metering customers can still use their grid-connected PV systems even during power outages.

Conclusion

In essence, consumers are seeking better incentives and a resolution of technical obstacles before they invest in residential solar PV systems. Policy makers, meanwhile, are coming up with multiple mechanisms to incentivize net-metering adoption from both sides to help DISCOMs improve their financial health and to enable a reliable energy supply. Unfortunately, this is just one side of the story. DISCOMs are wary of net-metering for various reasons. Policy makers are working hard to convince them to accept it as a viable solution. This convoluted state of affairs is, unfortunately, working against net-metering and India’s progress to achieve energy security. In the next post I will cover why DISCOMs view net-metering unfavourably. In the meantime, I hope that the solar industry will find solutions to the issues covered in this post.

Gayrajan Kohli is Senior Manager – Consulting at BRIDGE TO INDIA

12 comments

  • Well written, I am a die hard fan of net metering. I believe that inspite of all these issues, we have a large no. of ideal cases (reliable power availability, high tariffs etc.) and it will perhaps take many years before we start tapping the high hanging fruits. Let us start – policy makers and DISCOMs, time to give a boost. Meters, protections and such already addressed and proven issues are all history (proven World over). Let us prove that each Indian state can replicate volumes that Germany did, though I am sure it would be many times lower than that. But isn’t that a challenge all of us Industry guys want to take?

  • Hi Gayrajan

    Great analysis ! Agree at all respect except technical reliability issue of inverter , I am sure that digital combitional logic circuits shall overcome the grid sense and response issue of inverter. However its true that DISCOMS grid intellegency is a critical issue due to huge cost involvment to upgrade / to take DER signals which required SG deployment.

    Best wishes
    Parveen

    • Thank you, Praveen. The inverter issue has less to do with DISCOM or grid intelligence, and more to do with the regulatory requirements and willingness of inverter manufacturers to provide the required bypass mechanisms. Regulatory authorities must allow inverters to function during grid loss and inverter manufacturers must provide the required mechanisms to contain the loss of energy. From what I’ve been told SMA has provided a similar solution, though I still have to see it for myself.

  • […] From generation to delivery, India incurs one of the highest electricity losses globally. These losses can be as high as 30-40%. In comparison, other growing economies such as Brazil and China suffer only 17% and 5% losses respectively. For India to achieve its energy security and energy access goals it needs to plug these losses – and grid modernization has to be a very important component of this. In a bottom up approach, a larger integration of distributed generation can be an important part of the puzzle. It can help bypass the inefficient grid altogether. In the absence of cost effective storage, grid-modernization at the local level in form of net-metering can be an important tool. Unfortunately, despite central government’s best efforts, net-metering has not been readily adopted by all states or their DISCOMs. Reasons for their reluctance vary for each company and state. Focusing mainly on the residential segment, this article discusses their rationale and provides course correction required to make net-metering a success. [Refer – part 1 – consumers side of the story] […]

  • You definitions of net-metering vs. feed-tariff seems artificial and misleading. Net metering simply refers to the ability to net off the flow of power in two directions (to and from the grid) and does not have any connection to tariffs, but you say that net metering necessarily means one single tariff. Karnataka, for example, pays a higher sell rate and still it is called net-metering.

    • Globally, net-metering and feed-in-tariff is differentiated along the tariff lines. Net-metering tariffs are predefined as they are the same as buying rate. FiTs require a special rate. Just because Karnataka is calling it net-metering does not mean it is correct. Incorrect use of terminology is a major headache in India. Every few months we see a new term being coined for concepts that are already existing and well defined elsewhere in the world.

  • Hello Kohli Sir,

    A very good and in-depth analysis is vat I would say for this.

    Regardless of the tariffs and the incentives being provided, don’t you think there’s one more issue which is of unawareness inIindia and those who are well aware have no responsibility for the reducing the Carbon footprint. Every citizen has to understand the need of today and the cost which they look for to be at higher end would definitely be lesser than what they would be paying if we don’t switch to RE. Other than that, the cost of conventional energy will increase as we move further towards the end of fossil fuels and switching to RE may drive down the cost largely due to economies of scale.
    So, its high time to educate peoples on different angles of the issue.

    • Hi Shashwat

      Lack of consumer awareness is definitely an issue but it is not hindering net-metering’s adoption. Consumers are interested and approach multiple companies for installing solar solutions on their rooftops and land. They shy away from it when they come to know of technological and financial issues like the ones I’ve mentioned. It is a pity. The 2nd part of the article series discusses the other side of the issue, I think you should read it as well: http://www.bridgetoindia.com/blog/why-net-metering-is-failing-part-2-the-discoms-side-of-the-story/

      I strongly believe that the solution of solar’s growth in India lies in distribution. Politicians will never allow distribution to be deregulated. If we can find a solution around it then there is no stopping of solar adoption nationwide.

  • Thanks Gayarajan.. this is very informative write-up.
    Other than the issues mentioned in the article in my opinion there are two more reasons why Net-Metering is not picking up ..
    1. Availability.. at least in Chennai.. we had to wait a few months for the meter to be allotted by the TANGEDCO.. it takes anything between 2 to 6 months.
    Even those progressive thinking consumers who want to go for the future technology ..are not ready to let their installed PV plants idle away on their roof tops.. without generating any power ..just for want of the Net-Meter.
    2. The NET-METER readings for the generated power is less than that projected by the installers.
    A 1 KW system is supposed to generate between 3 to 5 KWh per day on an average.
    But the installed Meter reads only about 2 to 3 units.. This means the estimated savings would not be realized.
    Hope the situation will improve in the near future with, NET-METERs becoming more easily available.

  • Hi Sundararajan

    I am very sorry to hear about the difficulties you face.

    Meter availability is an issue in Tamil Nadu and a few other states because standardization is still underway. We do not see it as a permanent roadblock though. A meeting discussing how to ratify the standards was held two weeks ago. We are waiting for the final word on it.

    There are many reasons why your panels produced less than 3 units. Some of them are in your control and other are not. Some of the reasons for the poor performance could be:
    1. you have incorrect installation
    2. the panels and inverter are not properly maintained
    3. panel rating was not accurate – which is very likely incase they were from a cheap vendor, or,
    4. if it was raining or very cloudy during that time then there is nothing you can do

    I would recommend that you get in touch with your installer and ensure that the system is working correctly – it is still under warranty. You can also get it audited by a third party if you are willing to spend some money, but I would not recommend it at this stage.

    • I think I have not stated the issue accurately.
      This plant was installed by me.. as a Pilot project before doing this for customers.
      I have a separate solar Meter which measures the actual Solar Energy generated and also the ongrid Inverter displays the generated KWh.
      The Solar meter and the readings on the inverter are almost same. But this amount of energy is not shown on the NETMETER as exported. Kwh
      The average per day reading on Solar meter/Inerter is around 3.5 to 4.. but that shown on the Netmeter is around 1.5 to 2.
      lIs the NETMETER faulty or am I missing something.. ?
      Have discussed this on a separate thread also.
      https://www.linkedin.com/grp/post/4511689-259745671

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