Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid.

Understanding the Flow

Raj installs Solar PV System at his factory rooftop. He uses the energy consumed by his factory. The extra electricity is sent on grid. He is credited for it for later use.

Profit to Raj based on Net-metering

Raj installs solar power plant at his factory that generates 1000 units. He uses those 1000 units over the month.Assuming the tariff rate of Raj’s locality as Rs.7.50, he saves Rs.7,500 (1000 units* Rs.7.50/unit).

However, this would be the ideal condition. Considering the system cost, Raj will get LCOE* at Rs.1.50/unit, much less than what government sells.

Profit to DISCOM/ Government from Net-metering

On this scheme, the government just charges nominal regulatory fees to the solar consumers and installers. The Government generated electricity and DISCOMS face the reduced profit margins for same.

Briefing the Net-metering

• The charges are applicable on the Solar units traded between the consumer and the grid. The major government benefit is the RPO (Renewable Power Obligation).
• Reduces the transmission losses of electricity generation and usage in the entire cycle.
• The electricity is consumed first and extra is credited to the grid. The consumer has access to these credited units for a billing-cycle of up to a year/ based on policy.
• It is a very profitable model for consumers.
• The Government and DISCOMs profit margins are affected.
• The consumer gets the project payback within 3-4 years.

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.

Understanding the Flow

Raj installs Solar PV System at his factory rooftop. The entire energy generated is sold to the grid at a predefined unit rate defined by the government. The regular electricity consumption is taken from the grid and billed as usual.

Profit to Raj based on Gross-metering

Continuing the example of Raj and considering the regular billing mechanism:On consumption of 1000 units, Raj would pay Rs.7500 (Rs.7.50/unit*1000 units) as his bill. Raj installs solar power plant at his factory that generates 1000 units. As per the gross-metering concept, the entire electricity is sold to the grid at unit rate of Rs.3.00/unit. Thus, Rs.3000 (1000 units*Rs.3.00/unit) becomes the ideal saving of the consumer excluding the project cost. However, this would be the ideal condition. Considering the system cost, Raj will get LCOE at Rs.5.50/unit.

Profit to Raj based on Banking Charges

On this scheme, the government charges regulatory fees to the solar consumers and installers. The Government also gets costing benefits on generated solar units by the consumers. But, it comes with a big question mark from the CNI perspective, considering the solar PV system adoption and installation won’t be considerable.

Briefing the Gross-metering

• The charges are applicable on the Solar units generate by the consumer.
• The entire solar electricity is credited to the grid. The consumer is billed normally for electricity consumption.
• It is a very profitable model for Government & DISCOMS.
• The consumer gets the project payback within 8-10 years, much more as compared to 3-4 years of the net-metering.
• The CNI industries production cost shall increase, hindering the “Made in India” initiative and drive. There are chances that the existing companies might have to shut down, leaving several people jobless.

The Disparity of Net-metering and Gross-metering to benefit the consumers and the government both is much visible and has caught the limelight.

BANKING CHARGES clause can help attain this balance. As per the clause, the consumer is entitled to pay banking charges to government instead of completely selling it to the government. The banking charges are almost half the charges of tariff-feed-in of gross metering making it a more viable option for both the consumers and DISCOM.

Profit to Raj based on Banking Charges

On consumption of 1000 units, Raj would pay Rs.7500 (Rs.7.50/unit*1000 units) as his bill.Raj installs solar power plant at his factory that generates 1000 units.As per the banking charges concept, the consumers might have to pay banking charges on generated amount at rate of about Rs.1.50/unit. The net banking charge, Raj has to pay is Rs.1500(1000 units*Rs.1.50/unit).The electricity cost to Mr. Raj otherwise would have been Rs.7500(Rs.7.50*1000 units). But now he has to pay the bill with banking charges. Thus, the net saving for Raj is Rs.6000 (Rs.7500 – Rs.1500).However, this would be the ideal condition. Considering the system cost, Raj will get LCOE at Rs.3.00/unit.

Profit to DISCOM/Government from Banking Charges

The major benefit to government is of RPO & Transmission loss saving. Moreover, it gets additional amount of Rs.1.50/unit of solar as permanent source of income.

Briefing the Banking Charges Policy

Banking charges is much viable and profitable option for both the consumers and the DISCOM or government entities, over the gross metering.The flow of solar units trade and the definition of Banking charges is not provided in the policy

The Net-metering, applicable up to 10kW of systems has been a bang-on model accepted by the people with bumper perks and benefits. Removal of capacity restriction has opened doors for people to have a new source of income generation.

The Gross-metering, applicable above 10kW of PV system has arouse a lot of debates in the Solar Industry of India. The saving margin and project payback are reduced and lengthened to greater figures respectively.

The Banking Charges clause instead of Gross-metering has been pitched by the Gujarat State government in their power policy which seems to be a better model for both – the consumers and the DISCOMS or government entities.

PIXON supports and talks in the favor of the Gujarat Solar Power Policy that talks of Banking charges over the gross-metering implication. However, a lot of clarity is still required for smooth conduct. Probably, what everybody is looking for in the upcoming Implementation Policy (for Gujarat at least).

PARAMETER	NET-METERING	BANKING CHARGES	GROSS_METERING
Objective	Self-consumption of electricity	Not defined	Electricity sale to utility
Applicable	Upton 10kW	Beyond 10kW	Beyond 10kW
Tariff Arrangement	No payment by utility for electricity injected into the grid, beyond a limit	Not defined	PPA with the utility where utility to pay a per PPA price
Financial Burden	Government bears the burden in form of Electricity sell/ incentive/subsidy	Minimum burden to both CNI and Utility	Cost borne by utility and then passed through to the consumer
Energy Accounting	Metering arrangement to measure generation as well as consumption	Not defined	Metering arrangement to measure the generation only
Beneficiary	Assist consumer directly to reduce its electricity billing	Healthy balance of charges & duty for both CNI & Utility	Assist utility in meeting solar RPO compliance
Project Selection	First-cum-first basis	Fixed tariff	Competitive bidding
Utility’s Concern	Loss of revenue for utility – reduced grid consumption by the consumers	Utility sustains its financial health with Banking Charges	Not keen on signing PPA with small rooftop projects – higher FiT & administrative burden
Developer’s Concern	Less incentives may impact project viability for certain consumer segments	Less incentives may impact project viability for certain consumer segments	Grid unavailability to impact revenue
Net ideal savings based on Raj’s Example	7,500 (in INR)	6,000 (in INR)	3,000 (in INR)
LCOE based on Raj’s Example	Rs.1.50/unit (for about 25 years)	Rs.3.00/unit (for about 25 years)	Rs.5.50/unit (for about 25 years)

*LCOE: Levelized Cost of Energy