Tamil Nadu’s net metering policy – a step forward and two steps back

Tamil Nadu’s net metering policy – a step forward and two steps back

Tamil Nadu announced its final order on LT connectivity and net metering on 13th November 2013 (click here to view it). The highlights of this order are:

  • Generation Based Incentive (GBI) is applicable for domestic (residential) consumers. This makes the policy an attractive proposition for homeowners
  • This regulation is limited to government run institutions and residential consumers. Unfortunately, the net metering scheme rules out those consumers for whom solar would actually make sense – commercial clients (IT companies, private hospitals, educational institutes, malls and shopping complexes) and industries.
  • There is a policy disconnect between those clients on whom SPO’s are enforced and those eligible for net metering.

Tamil Nadu is one of the first states in India to come out with a net metering policy. It announced the net metering scheme under its flagship solar policy of 2012. Since then, there have been two separate drafts submitted on the Tamil Nadu Electricity Regulatory Commission (TNERC)’s website. The final order announced on the 13th of November 2013, has incorporated several comments from stakeholders.

The policy now allows residential consumers and housing societies to go via the net metering route. The tariff applicable to residential consumers under the highest slabs of consumption is INR 5.75/kWh. It is highly unlikely that any project developer will be willing to offer an OPEX (operating expenses) based solution at a price lower than this figure. Most residential installations will be self-owned (CAPEX: Capital Expenditures). In this case, one can expect a payback of around 10 years without the MNRE subsidy.

BRIDGE TO INDIA earlier interviewed MNRE officials and confirmed that the capital subsidy program (30%) has been indefinitely delayed due to lack of funds (see our blog).

Interestingly, a Generation Based Incentive (GBI) is also being offered to eligible domestic consumers. According to the Tamil Nadu Government Solar Policy, domestic consumers are eligible for a GBI of INR 2.00/kWh for first two years, INR 1.00/kWh for next two years, INR 0.50/kWh for the subsequent two years (Link: http://bit.ly/1cHq9Iv). This is an attractive proposition for residential consumers and can shorten the payback period. In addition to the GBI, there is the Chief Minister’s Capital Subsidy program which offers INR 20,000/kW for LT-1 consumers(link: http://bit.ly/1cNMpjM). It is not clear if both incentives will be simultaneously applicable or not. Nevertheless, the proposition seems attractive enough to incentivize residential consumers to set up their own power plants.

Unfortunately, the net metering policy leaves out industrial consumers and commercial consumers altogether. See table below for list of eligible customers.

Net metering policy: Tamil Nadu

This comes as a surprise because the Tamil Nadu Solar Policy 2012, enforces SPOs on HT I to HT V consumers. Industries typically do not work 24/7/365 and require a banking policy to export excess energy on to the grid. Leaving out such clients from the net metering policy will only increase the unit cost of procurement of solar power for these consumers.

Most factories and industries that fall under this enforcement are exploring the possibility to meet their requirement through in-house power plants. Ironically, this is something that would go against the interests of TANGEDO. TANDGEDO would lose out high value clients. Denying net metering to these clients implies that they would be forced to either procure solar power from TANGEDCO or utilize their grid to wheel power from solar power plants across the state (for which they have to pay a fee to TANGEDCO). Either way, TANGEDCO clearly wants to have its share of the solar pie.

Tamil Nadu’s solar policies are progressive and ambitious. It was the first southern state to announce a GW scale solar policy. It was also the first state to announce a net metering policy. In this case, though, the state has taken one step forward and perhaps two backwards.

What are your thoughts? Leave a comment below

Akhilesh Magal heads the Project Development team at BRIDGE TO INDIA. He likes to present his opinion on the policy environment in solar in India.

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