Andhra Pradesh’s distribution companies (DISCOMs) have requested the state’s electricity regulatory commission (APERC) to only allow gross metering for rooftop solar systems in the state.

In gross metering, a consumer is compensated at a fixed feed-in-tariff for the total number of units of solar energy generated and fed into the grid. The consumer then pays the DISCOM at a retail supply tariff for the solar power consumed. On the other hand, in net metering, the exported solar power is adjusted in the electricity bill against the power consumed. This involves a bidirectional net meter that records both import and export of power.

Considering the guidelines mentioned in the state’s Solar Power Policy 2018, the Andhra Pradesh Southern Power Distribution Company (APSPDCL) and the Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL) have stressed that DISCOMs will benefit from gross metering over net metering from which they say they are losing revenue.

The state DISCOMs have also suggested a generic tariff be set based on the costs involved instead of making payments based on the average pooled power purchase cost (APPPC).

In January 2019, Andhra Pradesh released a new solar policy to promote widespread usage of solar power and set a minimum target of 5 GW in the next five years, as reported by Mercom.

According to the existing solar policy, the consumers are free to choose either net or gross metering options for the sale of power to DISCOMs. The applicable tariff for either of the cases was decided to be equal to the APPPC agreed to by the Commission for the year during which the project is synchronized with the grid. The existing policy also says that the applicable tariff at the time of commercial operation date (CoD) will be paid for 25 years in case of projects executed under both net metering and gross metering basis.

According to the policy, energy settlement must be done every month. Groups of persons or societies setting up solar rooftop projects will be treated as a collective generation for the supply of power to the households of each society or group member. In the case of apartments or group houses, standard service meters may be used for net metering. The energy generated will be adjusted against the consumption of energy from the DISCOM by the developer or consumer every month. In the case of groups or societies, the energy generated should be prorated as per the installed capacity share, as mentioned in the agreement with the DISCOM.

In the case of excess generation, which is after the energy adjustment in any month, payment should be made by the DISCOM every quarter for the net energy at the APPPC cost as determined by the APERC for the year. The cost determined should be of the year in which the project is synchronized with the grid, and the applicable tariff at the time of commercial operation will be paid for 25 years.

If there’s excess consumption in any month, then the payment will be made by the developer or group or society for the net energy at the tariff determined by the APERC every year.

In the case of gross metering, the payment for energy generated from the rooftop solar system will be computed at the APPPC. This amount will be adjusted against the total billing demand for the consumption of energy for the developer or consumer from the DISCOM every month. The DISCOM will pay the balance after the adjustment for the month. However, a limit will be defined for the developers beyond which the DISCOMs will not make any payment.

Financial Implication to the DISCOM For Rooftop Solar Sytem Under Net Metering

The DISCOMs have also argued that they have to pay for the infrastructure cost incurred for supplying the power to the consumers. Moreover, they have to pay fixed costs to APTRANSCO and generating companies along with meeting their distribution business costs.

Financial Implication to the DISCOM For Rooftop Solar Sytem Under Gross Metering

For net metering, the DISCOMs are paying to the consumer for the units consumed effectively at the relevant tariff of that category. Citing an example, the APSPDCL stated that in the case of commercial consumers, the DISCOM is paying ₹9 (~$0.12)/kWh, whereas, in the case of industrial or domestic consumers, the tariff paid would be around ₹5.50 (~$0.07)/kWh. For the surplus units that are fed into the grid, the DISCOM is paying the rate of ₹4.50 (~$0.06)/kWh.

Compared to net metering, the DISCOMs are paying ₹4 (~$0.05)/kWh for all units generated by the rooftop solar system in case of gross metering. Further supporting their cause of gross metering, the DISCOMs have highlighted that solar tariffs in the country have plummeted to ₹2.50 (~$0.03)/kWh, and therefore the net-metering arrangement is “more dangerous.”

“While fixing the tariff for a generating company or a distribution company, the return on equity allowed is around 15% to 16%. In cases of rooftop solar projects, the tariff is not fixed on a scientific basis and not supported by any logic or reason,” the APSPDCL added.

Justifying their rationale, the DISCOMs have argued that initially, the per MW infrastructure cost of solar PV panels was around ₹130 million (~$1.8 million)  to ₹140 million (~$1.9 million). To promote clean energy, net and gross metering systems were then introduced. The Ministry of New and Renewable Energy (MNRE) also provides a capital subsidy to the consumers and developers. So, the generation cost of rooftop solar is falling year after year while the retail supply tariffs of consumers are increasing.

“The present per MW installation cost of a solar rooftop project is around ₹50 million (~$675,292). This has become an incentive to solar rooftop developers and is affecting the DISCOM revenues,” the DISCOM stated.

The DISCOMs have also requested the Commission to decrease the period of long-term contracts from 25 years to 10 years.

As per the APSPDCL’s comments, the renewable purchase obligation (RPO) for 2020-21 is 15%, and the present quantity of renewable energy availability is around 25% of its energy requirement. So, the state has met the RPO beyond the threshold limit.

“The smooth integration of 8,515 MW of renewable (solar and wind power) power which is variable in nature with the state grid demand of 9,000 MW to 10,000 MW is a difficult task,” it added. Adding to it, APEPDCL pointed out that under the falling price of solar and wind power generation and the incentives granted to these generators, it is necessary to withdraw the existing incentives.

The DISCOMs have also pointed out that the financial burden resulting from the solar rooftop power generation ultimately needs to be borne by the end consumers of the state.

“Making payments at higher rates to rooftop solar developers compared to reasonable return amounts is leading to unnecessary enrichment of rooftop solar developers,” the letter further said.

The demand for the roll-back of the net-metering mechanism has also been raised in other states.

For instance, in December last year, the KERC had issued an order which proposes various business models for rooftop solar. The Commission also felt that there was a need for a proactive and constructive role by the distribution licensees to facilitate smaller consumers to install solar systems at optimal cost, either through investment form the consumers or through third party investments by the distribution licensees themselves.

The story is similar in the state of Maharashtra. Maharashtra State Electricity Distribution Company Limited (MSEDCL) has proposed considerable grid support charges (GSC) for net metering rooftop solar systems with a capacity of over 10 kW.

According to Mercom India Research’s Q4 & Annual 2019 India Solar Market Update, the 2019 numbers clearly indicated that rooftop installations declined for the first time in five years, adding 1,104 MW, a 33% year-over-year decline. Among other challenges, net metering policy continues to be a drag on India’s rooftop solar sector calling for serious policy push by the government to get the market to the next level.


Image credit: EY418 / CC BY-SA