Maharashtra State Electricity Distribution Company (MSEDCL), Maharashtra’s largest DISCOM, has proposed a series of measures to counter growth of rooftop solar in its latest petition to the state regulator. The proposed measures include: i) shift from net-metering to gross-metering; ii) restrictions on capacity addition through lowering the cap on transformer level capacity (from 40% to 15%) and placing cap on individual system size equivalent to 50% of the consumer’s sanctioned load or contract demand; iii) wheeling charges of up to INR 1.26/ kWh on rooftop solar power output; and iv) changes in time of day pricing structure by removing peak pricing from all daytime use. The DISCOM has argued that growth of rooftop solar is diminishing its revenue base, increasing operational complexity and grid management burden.
- Policy makers and regulators need to walk the tightrope between addressing DISCOM concerns and supporting the rooftop solar industry;
- Rooftop solar industry can afford to gradually pick up extra costs associated with variable nature of power output and grid management;
- It is vital that the industry is given a reasonable amount of time to adjust and prepare before any changes kick in;
MSEDCL has extensively quoted precedents for such measures from the USA where, as the number of net metering installations has increased, utilities have piled up pressure on regulators to consider alternative policy design and tariff structures. Pitched battles have been going on in many states in the US between utilities on one hand and installers, investors and consumers on the other hand. Some states have already introduced a series of steps to restrict rooftop solar through phasing out net metering altogether (Alabama), placing system size caps or net metering capacity caps (Arkansas, South Carolina and Massachusetts), ban on third party rooftop systems, increase in grid access and exit fees, phased reduction in tariffs payable for gross energy injection into the grid (Ohio, Louisiana, Maine, New York, Indiana, New Hampshire) etc.
These changes have undercut economic viability of rooftop solar and introduced volatility in the market. In some states such as Nevada, boom times have come to a halt and then revived again after reversal of some measures. Many companies have also gone out of business as a result of the policy reversals. It is important that stakeholders in India learn the right lessons from this experience.
We accept the issues raised by MSEDCL in principle, although the timing seems premature. As per our latest India Solar Rooftop Map report, rooftop solar grew by 68% last year but still accounts for less than 0.3% of total power consumption or about 1% of total C&I power consumption.
We believe that equipment costs have come down to levels where the industry can start picking up the burden associated with variable nature of power output and grid management. Policy makers need to learn from international experience and provide long-term policy visibility to the market. MNRE needs to show decisive leadership by implementing the proposal to incentivise DISCOMs for faster rooftop solar growth (SRISTI scheme). Moreover, existing investments should be grandfathered (this is something India doesn’t typically do very well) and the industry should be given a reasonable amount of time to adjust and prepare in advance of the changes.