The impact of the 10kW net-metering limit on India’s rooftop solar market
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Key Findings
The Government of India’s new regulation excluding rooftop solar systems over 10kW from net metering will stall the adoption of larger installations, undermining progress towards the rooftop solar target of 40GW by 2022.
The majority of installed rooftop solar capacity of 6GW in India has been developed by commercial and industrial (C&I) consumers and the new regulations will deter the very consumers who are driving rooftop installations.
Although it is up to states to implement the central government’s restriction on net metering, many are likely to do so to address the loss-making discoms’ concerns over high-paying C&I consumers shifting to rooftop solar.
A net feed-in mechanism could be a “win-win” solution for all the stakeholders – it would not have a major impact on discoms’ revenue and would still be beneficial for the consumer.
Executive Summary
The Indian rooftop solar market grew from a mere 623 megawatts (MW) in 2015 to about 5.9 gigawatts (GW) by June 2020.1 However, there is a shortfall of about 34GW which needs to be fulfilled in the next two years to achieve the Government of India’s rooftop solar target of 40GW by 2022. Recently, distribution companies (discoms), fearful of losing their high paying Commercial and Industrial (C&I) consumers, have been issuing orders and notifications to restrain net metering provisions.
It took several years for the central government to ensure that all states offer net metering regulations to promote rooftop solar installations. Then, just when the market was taking off, discoms started to impose restrictions. Adding to the industry’s woes, on 31 December 2020 the Ministry of Power issued a new notification that mandates, under the “Consumer as Prosumer” section, net metering for loads up to 10 kilowatts (kW) and gross metering for loads above 10kW.2 While this central government notification is not legally valid unless the state governments implement it, many states are reluctant to allow net metering for corporate consumers and are likely to shift them to gross metering. This uncertainty deters many C&I players from deploying rooftop solar.
Under net metering, the electricity generated by the rooftop solar system is consumed by the user and any excess electricity is injected into the grid. When demand exceeds the generation from the rooftop solar system the consumer can import electricity from the grid. At the end of the settlement period, the consumer is only charged for the ‘net’ electricity utilised – the difference between the electricity produced through the rooftop solar system and the electricity consumed over the billing period.
Under a gross metering arrangement (GMA), all the power generated by the rooftop solar system is injected into the grid and the consumer is compensated for the exported power at a fixed feed-in tariff. The consumer pays the retail supply tariff for energy imported from the grid for consumption.
Even though the gross metering arrangement has existed for many years, it has found very few takers due to issues related to distribution companies, such as inconsistency in payments, the administrative processes, and unattractive feed-in tariffs. But with net metering limited to rooftop solar systems up to 10kW, consumer categories –barring small- to medium-sized households– will be left with an economically unattractive gross metering arrangement. This could prove a roadblock for the rooftop solar market, which has just started to pick up pace.
1 Bridge To India. India Solar Rooftop Map. June 2020.
2 Ministry of Power. Electricity (Rights of Consumers) Rules, 2020. December 2020.
Press release: India’s new net metering limit risks stalling progress on rooftop solar target
