How the newly introduced MERC’s net metering plans benefit solar power users in the domestic sector?

In the last month of 2019, the Maharashtra Electricity Regulatory Commission (MERC) set up draft guidelines withdrawing net-metering facilities for some consumers, limiting to gross-metering facilities only. After much criticism from the expert panels, including the Maharashtra Solar Sanghatan, the MERC has done away with the plan, mainly benefitting domestic rooftop solar plant users.

Net Metering Vs. Gross Metering

Solar plant for a home may have the capacity to produce more electricity than what is consumed. However, as storage is expensive, they can opt for a facility where the solar rooftop panels are connected to the grid, also known as grid-tied solar kits. Excess electricity is sent back to the network and power is consumed from the grid if there is a deficit. Distribution companies, generally referred to as DISCOM, buy the excess electricity and sell it to other consumers. In a gross metering arrangement, the consumer is required to sell the total units of electricity generated at a fixed rate back to the DISCOM. The speed at which the DISCOM buys the electricity is typically lower than the retail supply rate. All units of electricity generated by the rooftop solar power plant have to be sent to the grid, and therefore a gross metering arrangement uses a unidirectional meter. A gross-meter will tell you exactly how many units of electricity your solar panel generated. In a net-metering arrangement, a bi-directional system is used. You are allowed to consume the electricity generated by your rooftop solar panels for home use. Whatever units are unused is sold to the DISCOM. Whatever you drank from the grid (if you have a deficit), is accounted for in the final bill. Both imports and exports are calculated by net-meter.

Advantage of Net Metering over Gross Metering

In a net-metering arrangement, compensation is calculated typically at retail supply rates. However, in a gross-metering method, the compensation is generally lower than retail supply rates. This is the reason why DISCOM companies discourage the use of net-metering and encourage the use of gross-metering as a revenue protection measure. Moreover, with a gross-metering arrangement, you do not have direct savings on your electricity bill. Instead, you are merely earning an additional income each month by selling electricity to the grid. It may typically take longer to break even on your rooftop solar panel investment with net-metering (depending on capacity and usage). To encourage solar production, governments set up rules and regulations that help residential solar systems and commercial and industrial setups of solar power generators to have maximum savings and can see a return on investment at the earliest. However, they are also obligated to protect the interests of DISCOM, and for these reasons, they set tariffs based on caps.

Draft vs final regulations

The draft proposal for net metering policy in Maharashtra said that consumers with more than 300 units of electricity generation per month, will compulsorily have to sell anything excess of 400 units at a fixed tariff rate of Rs 3.64/unit. The prices for the purchasing power was around Rs. 10-Rs. 11. This means if 1,000 units are generated from the rooftop solar plant, and 800 units are consumed, the home solar system user will still have to pay for 500 units (at the tariff rate applicable), as the offset is only for 300 units. Moreover, Rs. 3.64/unit was completely unacceptable as it clearly favours the interests of the DISCOM, discouraging rooftop solar panel generators altogether. At such a miserly rate, the return of investment for the rooftop solar panel would take much longer as the savings on the electricity bill would be negligible is any at all. In comparison, if a proper net-metering system is used, the solar energy for home, generated by the rooftop solar panel is first consumed for internal/captive requirements. Only the excess is sold to the grid. Subsequently, the consumer’s intake from the grid, the exports and imports would be adjusted. This would lower the electricity bill significantly. These regulations seem to have been completely taken in the interests of DISCOMs only and acted as a hindrance in achieving the central government’s goal of 100GW of solar by 2022. Environmentalists across the state widely criticized the move. Since the purpose of combating climate change had not been taken into consideration at all. It would curb any new instalments of solar panels, which would also offset India’s independence form import of fossil fuels. Encouraging solar not only has direct ecological and economic benefits, it also urges employment and revenue generation. After much ado from the solar enthusiasts of the state, the MERC has made sweeping changes to the old proposal. The new rules are in keeping with the motive of encouraging solar across the country. In the final proposal, the cap on 300 units has been removed entirely, and net-metering is made available for all generators (residential, commercial and industrial). There is other good news for subsidy on solar panels in Maharashtra as well. Earlier, the registration fees for small consumers was Rs 500 for up to 5KW and Rs. 1000 after that. With the current regulations, the costs will now be Rs. 500 for up to 20KW and Rs. 100 per 20 KW after that.

Conclusion

The new regulations set by the Maharashtra government come as a welcome respite for all rooftop solar panel generators and has been taken in the right direction. Maharashtra has been at the forefront of the solar revolution in the country and targets to produce 11,926 MW of solar by 2022. Listening to the voices of solar power enthusiasts, these new rules by far seems to be the most progressive decision for encouraging solar power generation. The new rules are in line with the economics of rooftop solar panels benefits of net-metering against gross-metering. With the rates of some of the best solar panels for home use decreasing rapidly, domestic users in Maharashtra can give solar power system for homes a serious consideration to make significant savings on electricity in the long run. The new proposal brings new hope to net-metering lobbyists who take a substantial review of the economic benefits to domestic solar fanatics of the state.