Bridge India

MP announces a progressive decentralised RE policy

Madhya Pradesh government has come out with a new decentralised renewable energy policy focusing primarily on rooftop solar systems. The policy’s target to install 2.2 GW of rooftop solar capacity by 2022, is consistent with the Government of India’s national rooftop plan of 40 GW by 2022. MP is ­­one of the first few states including Himachal Pradesh and Maharashtra to revise its decentralised renewable energy policy to align with national policy.

  • The policy provides flexibility to consumers willing to set up a project for complete captive consumption, on net metered basis or on gross metered basis with attractive open access incentives
  • The policy is applicable for projects up to a capacity of 2 MW
  • The policy also recognises and extends benefits to rooftop solar installations by Renewable Energy Service Companies (RESCOs)

As of September 2016, MP’s total rooftop capacity stood at a mere 13 MW. As per BRIDGE TO INDIA estimates, the state is likely to install total rooftop capacity of only about 650 MW by 2022 in the ‘business as usual’ scenario. The new policy has many consumer- and investor-friendly measures.

In our view, the policy has three key elements. First, it allows for both net- and gross-metering connection for rooftop systems with a capacity of up to 2 MW subject to certain limits depending upon local transformer capacity and consumer load. It is worth noting that most other states cap the system size for net metering at 1 MW. Second, the policy recognises the role of RESCOs in the rooftop solar sector and provides for an implementation framework for the same through BOOM/ BOOT models. This is expected to enhance consumer interest in the RESCO framework and in turn, increase rooftop installations in the state. Finally, the policy provides open access incentives, for a consumer/RESCO to sell surplus electricity to another consumer in the state, as detailed below.

Summary of key policy provisions

Net metered system Gross metered system Others
Energy accounting Surplus electricity is carried forward during the financial year and paid for at average pooled purchase cost (APPC) at the end of the year Surplus electricity to be paid for as per MPERC regulations after deducting applicable wheeling and banking charges No compensation for surplus electricity
Wheeling and banking charges 100% exemption As per MPERC regulations with concession of 4% of energy injected NA
RESCO framework Rooftop owner is compensated for surplus electricity with revenue sharing between RESCO and rooftop owner governed under a separate power purchase agreement (PPA) between the two parties Power generated by RESCO can be sold in accordance with existing policies RESCO enters into a PPA with the rooftop owner to sell electricity at a mutually agreed price


Incentives · 100% exemption from cross-subsidy surcharge

· 100% exemption from electricity duty/cess for system life for LT consumers and for first 10 years for other consumers

· VAT and entry tax exemption for all equipment


Already installed distributed power systems are allowed to migrate to the current policy. Another positive element of the policy is that it lays out the registration and application process clearly for consumers wishing to set up distributed power systems.

Overall, the policy is a strong positive signal for development of the sector. It is a useful template for other states planning to push decentralised energy.

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