Ministry of Power with their notification dated 31st December 2020 under Rights of Consumer, issued a new notification dated 28th June 20201. This article is the interpretation and explanation of different provisions in the Ministry of Power notification dated 28th June 2021 regarding ‘Rooftop Solar’ projects under ‘Rights of Consumer’ provisions of electricity act 2003.
Ministry of Power (MoP) issued a notification dated 31st Dec. 2020 under ‘Rights of Consumer’ which included few clauses on ‘Rooftop Solar’ projects. One interpretation was that the rooftop projects will be restricted to 10 kW under net-metering provisions and above 10 kW it will be under gross metering.
There were a lot of debates, discussions and huge opposition mostly by the entrepreneurs in the solar rooftop business. We at Solar Energy Society of India (SESI) organized one debate involving all stakeholders and suggestions were submitted to MoP. Considering the general outrage against such a provision, MoP kept the notification on hold. Now a new notification dated 28th June 2021 is released. This is a much clearer notification with minimum ambiguity.
Interpretation of the notification
1. ‘Gross Billing’, ‘Net Metering’, and ‘Net billing’ are now clearly defined.
This is explained with examples below:
a. Gross Billing: Role of ‘Prosumer’ as “Generator” and as “Consumer” are separated. All energy generated is exported and all energy consumption is imported. There will be practically 2 meters; one for export of solar power to the grid and one for import of power from the grid. Exported power will be purchased by the utility at a predetermined rate.
This is a very similar arrangement as PPA (Power purchase agreement), which is termed as ‘feed-in tariff’.
For e.g. solar power generated in a month is said 40000 kWh and the feed-in tariff decided by the state regulatory commission is Rs. 3 per kWh then the power purchase cost is INR 1.20 lakhs. If the prosumer’s consumption for the month is say 100000 kWh and at regular tariff, the bill at INR 8 per kWh will be INR 8 lakhs; then in this case prosumer will actually get set off of INR 1.20 lakhs for the exported energy. Net bill will be INR 8 lakh – INR 1.2 lakh i.e. INR 6.8 lakh. In this case, the consumption of prosumer is the same as the import of energy.
So even though the prosumer is producing 40% of his total energy consumption, the set off in the bill will be just 15% (INR 1.2 lakh in bill amount of INR 8 lakh).
b. Net metering: Almost everyone knows about net metering. Exported units are deducted from imported units to arrive at net import/export, and the bill for this net consumption is raised at the normal tariff. Here generated units get 100% unit to unit setoff.
Financially most attractive option
c. Net billing or net feed-in: This is an interesting and very tricky case where the prospective consumer who wants to adopt a solar rooftop project will need to do a lot of calculations to predict financial savings.
During daytime when solar power is generated; at any point in time net export or import of energy depends on the ‘generated solar power’ and ‘load’ of the industry. For e.g., if the solar power generated at a given time is say 425 kW and a load of the industry is 600 kW, then there is the net import of 175 kW. If a generation is the same at 425 kW and load is said 300 kW then there will be a net export of 125 kW. As generation and load both are dynamic in nature, this import/export value practically changes every second. Billing in this case is not on the basis of the total consumption of the consumer but will be on the net import of the consumer.
Try to understand this with different examples:
i. A prosumer is a process industry like cement or textile, with steady load; 24 X 7 for 360 days a year: The minimum load is said 3200 kW and maximum load is 4600 kW. The prosumer has a rooftop project of 1000 kW. Now at any point in time, the maximum generated power of 1000 kW will still be smaller than the minimum load of 3200 kW. Hence there won’t be any export at any point in time. Hence in this case the system will behave equivalent to the ‘Net metering system. All generated units will be deducted from total consumption before billing.
ii. Case II: A commercial company/office which works in the daytime, 10.00 to 17.00 hrs. 5 days a week; Such office is likely to have large variation in the load. Summertime load due to A.Cs. and fans can be as high as 4 times winter time load. A load of this commercial building varies from say 20 kW to 400 kW. 20 kW is the minimum load when the office is not in operation. If they have say 200 kW solar rooftop system, then there will be many instances when generated power is more than the load and excess power will be exported. It is very likely that on weekends when the office is closed almost all the generated power will be exported.
If we take 104 days for weekends and say 21 days for holidays then for 125 days almost all power will be exported. So, we expect around 35% of the annual generation is exported in those 125 days. It’s very likely that during wintertime when A.C.s and fans are rarely operated; the load will be very low and again large parts of generated power will be exported. In summers it will be the other way. During office hours it’s very likely that there will be net import all the time due to high load of air conditioners and all.
However, as summer days are long, power generated before and after office hours will still be exported. After a detailed study one may conclude that out of total generated power 55% is net export annually. As imported power can be 3 to 5 times costlier than exported power such a situation is not favourable to the prosumer. E.g. take a sample bill for a month: Say total consumption is 15000 kWh and at INR 10 per kWh bill amount would have been INR 1.50 lakhs in absence of solar rooftop project. If the solar generation for that month is say 8000 kWh out of which 5000 kWh was net export then the calculations will be as below.
- Generation set off the amount at INR 3 per kWh of ‘net feed in’ tariff will be INR 15000 (5000*3)
- Net import: Total consumption – total generation + net export = 15000 – 8000 + 5000 = 12000 kWh.
- As per the retail tariff bill for 12000 kWh (@ INR 10 per kWh) will be INR 1.2 lakh.
- So-net billing will be INR 1.2 lakh – INR 15000 i.e. INR 1.05 lakhs.
- Saving is INR 1.50 lakh – INR 1.05 lakh = INR 45000 i.e. 30%
- Solar power generated is 8000/15000 = 53.3%.
You end up in a situation where you generate 53.3% power and get financial returns of 30%.
In a nutshell, one has to study the load pattern of the organization, holidays and weekly offs and all such factors to estimate the total amount of power that will be exported and imported annually. The amount of net export has to be small as compared to net import to financially justify the projects. It will be difficult to justify such projects for schools, colleges etc. where the number of holidays is too many which will result in net export of power. More the net export, lesser is financial gain.
Estimating financial savings will require great skill and understanding of the load pattern of industry; where load variation in the industry is large and solar power generation is comparable to the loads.
2. There is a slight ambiguity in point no. 3 which says the arrangement “shall be” in accordance with regulations by state electricity regulatory commissions. It also says that commission “may” allow net metering to the prosumer for loads up to 500 kW. Even though everyone is interpreting this as permission for net metering up to 500 kW; the construct “may allow” leave space for ambiguity and there is a small chance that it can be interpreted as this decision is left to the discretion of the state ERCs. It would have been better to use “shall allow” instead of “may allow” to avoid ambiguity.
Generally, this notification is a welcome step. Due to poor financial returns, not many projects are expected in the ‘Gross billing’ category. Net metering is financially most attractive and the limit up to 500 kW covers most of the consumers. “Net billing or net feed-in” category will need careful analysis of load pattern, holidays etc. to estimate reasonably accurate savings for any prospective consumer. Any rooftop solar company will have to be very careful in committing financial savings in ‘Net billing or net feed-in” mode.
