By Rahul Tongia
Solar energy is not just very good for the atmosphere, quite a few buyers uncover it very good for their pocket as effectively. It is the least expensive new-make for electrical energy in India. Forty % of India’s ambitious one hundred GW solar energy target for 2022 is meant to come from “rooftop” photovoltaic (PV) generation, or solar cells installed by finish-customers (they can set up it anyplace on their premises). But the actual penetration, therefore far, is only of a really low %. Most solar energy generated has come from massive grid-scale solar farms, usually via massive-scale bidding. Rooftop solar was selecting up steam till the current Electricity (Rights of Consumers) Rules gave a clarification on how to value rooftop solar energy this, business professionals worry, could stifle, if not kill, rooftop PV. The new norms will decrease the payments to rooftop PV owners, but provided solar rates have fallen, a lower in rates may possibly be needed and fair.
The updates are an vital evolution in the hitherto hodge-podge customer PV guidelines that unique states adhere to, and it is time for regulators and policy-makers to uncover a new framework for pricing rooftop solar that is not just based on explicit or implicit help mechanisms, but functions for all stakeholders—not just the PV-owner but also the discom.
The crux of the concern is pricing. Grid-scale energy is simple to price—there is usually a bid that discovers the value and the discoms sign agreements to purchase such energy. What about rooftop solar? There are two issues with setting rates for rooftop solar. First, not all buyers are the identical. Current retail electrical energy tariffs differentiate involving residential, agricultural, industrial and industrial customers. The latter two segments, on typical, overpay to cross-subsidise irrigation pumpsets and households. Even inside a category, we have progressive slabs or tiers of pricing, with bigger (ostensibly richer) buyers paying more than the category typical. Second, exactly where does the rooftop solar energy go?
If the household consumes their personal solar energy, this reduces the quantity of energy that they will need to purchase from the discom for such customers, incremental tariff based on their slab that they stay clear of tends to make ‘rooftop PV’ generation worth it. But, the actual challenge comes when we take into consideration any surplus PV energy that they do not consume—say, when the home is empty. Unless they have a battery to retailer this energy, which is pricey, the logical option is to feed in such electrical energy to the electrical energy grid. But, what should really they be paid for such energy?
A “simple” option is to treat import and export of energy at the identical price, equivalent to the meter spinning backwards when they produce surplus solar, referred to as net metering, which was the prior norm. But this suggests that the electrical energy getting fed in to the grid is worth the retail electrical energy value for the finish-user. This creates numerous difficulties. First, this suggests that the bigger (and richer buyers) advantage more. Second, this becomes really pricey solar energy for the discom. If they have been interested in rising green energy, they could have basically procured wholesale grid-scale solar at ~`2/kWh (or `2.25 like transmission and distribution losses), as an alternative of proficiently paying, say, `8-10 per kWh through offsets via net metering (based on the retail tariffs for chosen sets of buyers).
A couple of states let what is termed “banking”—where the customer can give surplus solar energy mid-day, and then offset their units of electrical energy consumed at an additional point in time, often for a nominal charge. So, if a customer offers solar energy mid-day, but asks for compensatory energy in the evening, which is when the grid is facing peak demand, these are not the identical for the utility. In truth, the utility may possibly even be paying a hefty premium for procuring energy in the evening. Rates for banking solar energy are low, most likely to encourage solar energy, but, however, if the customer is treating the grid like a battery, they are not paying for that privilege.
The new Consumer Rules limit net metering to 10 kW of feed-in, which is nevertheless significantly bigger than most residential consumers’ connections to the grid. Any bigger solar connection should really now be priced via gross metering, as an alternative of net metering, which means there would be a separate value for such solar energy. Some states have set PV gross metering rates at the utility’s typical energy procurement price, which is nevertheless greater than the new benchmark grid-scale solar value (close to `2/kWh), but invariably decrease than the highest customer retail value slab.
This shift in guidelines definitely hurts these who have been producing out like bandits beneath the older regime. This is ahead of thinking about the 30% capital subsidy households could avail—which proficiently meant we are subsidising the wealthy, who have the roofs and the higher tariffs. But the older solar pricing method was making distortions that in the end hurt other consumers—the ones with no rooftop solar. This wasn’t just since of the current electrical energy rates equilibrium relying on overpaying buyers but also since the existing electrical energy customer rates do not reflect the correct fixed expenses of infrastructure for final mile delivery.
As chosen buyers boost their use of rooftop solar, they cut down their units or kilowatt hours of electrical energy bought, but the infrastructure nevertheless wants to be constructed for the peak demand, which is usually in the evening. With much less purchases, the aggregate price (Rs /kWh) goes up. But, the more typical rates go up, the more people today want to decrease their usage of the grid (via rooftop solar, open access, or other suggests), additional raising expenses. This has been termed the Utility Death Spiral. But it is crucial to emphasise that it is not the utility that necessarily bears the brunt—in India, they are regulated entities with fixed prices of return—but other buyers (usually poorer ones) for whom rates would go up.
How do we repair this? What is in the end necessary is for prices—both retail and PV—to reflect correct expenses. Unfortunately, this is less complicated mentioned than accomplished. We do not but have ‘time of day’ pricing for buyers, except in niche situations for bulk buyers. Even ahead of dynamic pricing, state electrical energy regulatory commissions (SERCs) will need to figure out a fair worth for incoming solar. If the government desires to encourage solar energy, any help it desires to offer you should really be explicit and outdoors the tariff mechanisms. Such a value would evolve more than time, but state regulators should really give many years of clarity in pricing, with no which the uncertainty would deter deployers.
We also will need to overcome utility resistance, covert and overt, which has usually been via onerous paperwork or beneath the guise of “grid security”. Similar resistance occurred ahead of, with Open Access, exactly where bulk buyers more than 1 MW in size could leave the discom for third-party suppliers, but utilities feared losing their “paying customers”. In truth, via concerted policies and technologies innovations, we will need to boost the quantum of feed-in solar that the final mile infrastructure can absorb.
In the brief run, we have massive headroom for rooftop PV, which is beneficial for the grid since it brings the generation close to the customer and also spreads it out. There is also scope for increasing the ecosystem of options providers who offer you not just excellent deployments but even finance for purchasers. In parallel, we will have to repair the extended-run bottleneck for scaling—equitable and sustainable pricing frameworks. The Consumer Rules aid spur the conversation.
The author is Senior Fellow, Centre for Social and Economic Progress
Views are individual