The new Solar Policy of 2021 by MNRE has certainly twitched debates in the entire solar market of India. In this blog, we discuss with examples about Net-metering, Gross-metering and Banking charges that are applicable in Solar Installations. It is done using an example of Raj’s factory without solar and his factory with solar when different metering policies are applicable.
Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).