Why Net-metering is failing – Part 2 – The DISCOM’s side of the story

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]

  • Net-metering is in an experimental stage. Each state and DISCOM will have to customize its policy and commercial aspects for itself for net-metering to be successful
  • The narrative supporting net-metering needs to change and reflect instead that it reduces AT&C losses and need for land
  • Infrastructure upgrade is a default requirement for India, and net-metering is another reason for faster upgrades and integration of new and better technologies

blog as on 13.5.15

The Arguments

Through interviews with DISCOM officials, regulators, net-metering customers, solar companies and various industry experts, arguments that are usually provided against adoption of net-metering were compiled and categorized. Some of these arguments are valid, while others are not.

1) Commercial:

a) Loss of profitable customer base: The keyword here is “profitable”. Customers in higher tariff slabs are the most profitable for DISCOMs, and are also the ones that will benefit the most from net-metering. Implementation of net-metering will reduce the grid based energy consumption of these customers and help them fall into the lower tariff slabs – which will cause loss of profitable customers for the DISCOMs. This is legitimate concern for the DISCOMs who are already reeling under heavy financial losses.

2) Infrastructural and technical:

a) Demand-supply gaps: Another argument offered is that since net-metering will require greater energy banking for night time use and during high cloud cover, it will result in increased demand-supply gaps during peak times. This is simply not true. During day-time, through net-metering, residential complexes provide distributed supply of energy into the grid. With proper grid management, this power can be transported over short distances to the local commercial and industrial campuses for use. It also replaces the need to transport power for commercial and industrial use over long distances, as is currently the case. Net-metering supplements the grid with additional power to cover the demand-supply gap, not create it. For more commercialized cities, it can even help distribution companies to avoid buying expensive peak power (typically between 3-5 PM, in case of Delhi).

b) Grid balancing: If there are too many solar installations compared to the local service transformer’s size, then managing the load demand and energy supply can become problematic. While grid balancing is indeed a cause of concern, net-metering and other similar mechanisms are not the cause of it, they are merely highlighting how technologically backward our grid is. India is in critical need of infrastructure overhaul and grid balancing technology is required with or without solar or any other renewable/intermittent resources.

3) Policy: Lack of clear installation guidelines and processes from central and state regulatory authorities is another thorn in the side of net-metering execution plans.  Without proper processes and training and education of the distribution company employee at the last mile, even well intended policies and regulations will not work. While 21 states in India have announced policies and guidelines around net-metering, it is only operational in a couple of states.

The Reality

Unfortunately, India has not, as yet, properly and comprehensively studied net-metering, its effects, infrastructure requirements and our shortfalls to effectively utilize it. Apart from reducing T&D/AT&C losses, as discussed above, distributed generation along with net-metering has three major advantages:

1) Contributes towards grid stability: Utilities deliver both active power and reactive power along their distribution lines. While active power does the actual work when you flip on a light switch, reactive power rectifies voltage fluctuations and helps maintain voltage to deliver active power. Sudden lack of reactive power can cause grid instability and even blackouts like the one in the US in 2003. However, in addition to active power, grid connected solar PV systems also provide reactive power to the grid – which helps provide stable voltage. Thus, a distributed web of localized, net-metered solar installations will help DISCOMs run and maintain a more balanced and reliable grid.

2) Smart upgrades: India’s current power transmission and distribution infrastructure is in a shockingly poor condition, and is in dire need of an upgrade. DISCOMs like the Tata Power Delhi Distribution Limited (TPDDL) spend up to Rs 300-400 Crore annually to maintain their networks. Generation and transmission companies spend much higher. Compared to new capacity additions through centralized power generation, net-metering requires lower infrastructure upgrades with some natural balancing required within area of substations. The technology integration required for net-metering is a part smart-grids that India already needs for its energy security.

3) Reduces need for large pieces of land for newer power infrastructure: A no-brainer, but an often overlooked advantage of net-metering for the governments is that it uses the rooftops instead of acres of land which is required for ground mounted solar projects. The average residential rooftop is around 150-200 sq.m, and the total realizable potential for rooftop solar in India is 57-76 GW by 2024. That’s equivalent to over 380,000 acres of land area! If net-metering is comprehensively adopted nationwide then the pressure of land acquisition for meeting solar generation obligation of the state governments is greatly reduced.

Narrative needs to evolve

The discussion supporting net-metering has been that of energy availability. Instead, the aforementioned benefits of net-metering should be the real motivation for acceptance by the DISCOMs and states. More important still is the irreplaceable position that net-metering holds in implementation of smart-grid in India. Case in point, Puducherry, where adoption of smart grid and net-metering has already proved that it reduces pilferage, stems AT&C losses, and helps DISCOM become profitable. Consequently, given the heavy commercial losses, DISCOMs should shift their focus from increasing their revenues to reducing their losses – which will better impact their profitability.

Conclusion

The solution to increasing net-metering adoption in India cannot be singular (RPO/RGO requirements); it has to include logical short and long term financial benefits for DISCOMs, change in regulatory requirements for inverters, comprehensive installation guidelines, an in-depth study of net-metering’s effect on the grid and, most importantly, a change in the narrative supporting net-metering. Net-metering (and smart grids) are too important for India’s energy security. It’s time all stakeholders – end consumers, manufacturers, policy makers, distribution companies and industries – take notice and act rather than just taking part in endless discussions.

Gayrajan Kohli is Senior Manager- Consulting at BRIDGE TO INDIA

1 comment

  • Better solution, even fairer. It works with a modern smart grid. Fix variable fair prices to the electricity generated by the roof top producer. And net meter not on the energy but on the price from both side.

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