"Impact of recent net-metering changes on Indian solar industry"
Posted: January 19, 2021,
- In 2015, the NDA administration announced the ambitious target of 175 GW of renewable energy by the year 2022, and this included 100 GW of solar. Out of the 100 GW of solar power, 40 GW is from the rooftop solar sector.
- As of March 2020, only 4.6 GW of rooftop solar was installed, where 35.4 GW of solar needs to be installed by 2022 to achieve the goal set by the NDA administration.
The NDA govt recently announced effective 1st April the cap for net metering which is currently set at 1 MW will be reduced to 10 KW.
Net-Metering vs Gross-Metering
Net-Metering- when a person has installed rooftop solar at his/her residence, office or industry, etc when more no of units of electricity has been generated by roof-top solar than their consumption or which is required for there daily purpose, where excess electricity can be supplied to the electricity board.where they give you a monthly bill based on the units consumed and units supplied. When your supply is more than consumption they pay you as a credit in bills.
Gross-Metering- when you get roof-top solar installed at your residence, office or industry and any other place, etc. you will have to supply the electricity generated from rooftop solar directly to the electricity board without consuming it and the electricity board gives special tariffs to those who have installed the roof-top solar, where the electricity board supply electricity for their suppliers. So gross-metering is not much beneficial to roof-top solar installers.
What are the changes?
- Gross-metering mandated for projects over 10KW.
- Most commercial & industrial buildings require more than 10KW solar power for their daily consumption.
- The Rs.3 feed-in tariff that BESCOM gives will result in a very low ROI, therefore, making rooftop solar much less profitable.
- Because rooftop solar is a big investment and there is less return on investment, people will be less enthusiastic about installing solar PV modules.
- there is a 25% of ROI on investment with net-metering compared to 6-8% of ROI on gross-metering.
Impact on rooftop solar industry:
1. The rooftop solar industry has been seen rapid growth in the past few years due to the advantageous net metering rules & ever decreasing component prices.
2. While there are a handful of big players, backed by foreign asset management companies, the vast majority of the players can be categorized as Medium & Small scale enterprises.
3.They directly employ thousands of field engineers, system designers, installation crew & maintenance personnel.
4.With the rule change, this entire industry will have to pivot to residential & small commercial projects which are significantly smaller than their current target market.
5.This switching will clearly lead to reduced profitability & massive job cuts. Renewable energy has been a key job growth area in most of the developed & developing countries. This rule change will take India in the opposite direction.
What can be done to remedial the situation
1. This policy is yet to be ratified by the state government authorities. This is expected to take another 7-8 months. So everyone interested in installing >10 KWp rooftop solar projects should make use of this remaining time window to get their projects approved.
2. Several national & state level industry associations have mentioned that they will challenge this rule change at various courts emphasizing its impact on the industry & on the fight against climate change.
3. A small concession that the governments can make is to double the feed-in tariff for gross metering from the paltry Rs 3 to Rs 6. This will slightly improve the ROI.
What can you do?
As a member of the general public and solar enthusiast, you have to raise awareness among people through social media and discuss with your friends. So that everyone is aware of it.
- If the government doesn’t remove this policy or provide some relaxation to the policy this would be a Hugh impact on solar installing company’s and also impact the country’s economy.
- This also wouldn’t help the government from achieving its goal of 40GW of solar power in the roof-top sector by 2022.