21 November 2016 | BRIDGE TO INDIA
Rapid growth in the US rooftop solar market and the number of net-metering connections has opened a battle-front between utilities on one hand and solar developers and consumers on the other hand. Utilities are arguing against the rationale of giving customers full retail credit for their excess energy and vigorously challenging the current net-metering framework in many states including Arizona, Nevada, Maine, Florida, and Alabama. Future net-metering policy in these ‘battle ground states’ is now being decided by public hearings, ballots, regulatory intervention and court rulings.
Evolution of net metering policy in USA holds vital lessons for the fledgling rooftop solar market in India, which is still very small but growing rapidly (refer).
- Many Indian utilities are already resisting net-metering connections for commercial and industrial (C&I) customers;
- The current Indian net-metering regulations are too simplistic and they need to be overhauled urgently for sustainable growth of rooftop solar in India;
- Waivers provided for promoting the rooftop solar market need to be phased out over time and both utilities and customers should be aware about how this transition will happen;
Last year, a decision by Public Utilities Commission (equivalent to a state electricity regulator in India) allowed utilities in Nevada to reduce net-metering credit provided to consumers by as much as 75%. Most installers and customers were badly hit by this decision, which led SolarCity, one the largest installers, to completely stop new deployments in Nevada. The original ruling revoked net-metering benefits for around 32,000 customers, who won relief only after a long regulatory battle and reliance on grandfathering provisions. If something similar were to happen in India, customers here may not be as lucky.
If a state like Tamil Nadu realistically installs around 700 MW of C&I rooftop solar by 2020 based on BRIDGE TO INDIA’s overall market projection, the state utilities will lose 0.8% of their power sales by volume but 1.4% by revenues, equivalent to INR 9.7 billion (USD 140 million) annually. The reason for disproportionate loss of revenues is that C&I customers pay the highest tariffs to subsidize residential and agricultural customers. Some states including Tamil Nadu and Maharashtra are already resisting net-metering connections for C&I customers b. Other states are also likely to take that view.
Owners of rooftop solar installations should obviously pay for access to the grid and for services such as banking of power. In the Indian context, the utilities also have to account for aspects such as universal service obligation and cross subsidization of power. The problem is that determining these charges is easy in theory but extremely cumbersome and contentious in practice. Moreover, any waivers provided for promoting the rooftop market need to be phased out over time as it is not fair to expect the utilities (or other customers) to bear the burden in the long-run.
The current Indian net-metering regulations are too simplistic. There is usually no grandfathering protection for customers and no satisfactory financial compensation for the utilities. If the utilities are forced to provide ‘free’ net metering connections as at present, they will resist growth in this market and rooftop solar will fail to realise its true potential. India has the advantage of being a late mover and the regulators should learn from international experience.