State's evolving rooftop solar policy

State's evolving rooftop solar policy

The installed Rooftop Photovoltaic (RTPV) capacity in Bengaluru is around 3.5 MW today, while Karnataka’s revised target is 2,300MW for 2021-22 (around 1000 MW for Bengaluru). To achieve this ambitious target, a more aggressive approach needs to be adopted by stakeholders and policy makers in the state.

The net-metering rates are Rs 7.2/kWh and Rs 9.56/kWh, with and without Ministry of New and Renewable Energy  subsidy, respectively. This policy allows those with large rooftops to have excellent business cases. However, it does not bode well with a large section of domestic consumers who have the financial prowess to invest in RTPV systems, but are constrained by their available rooftop area.

Since their generation is unlikely to exceed consumption, the expected returns on investment are poor and this has been the primary reason behind the sluggish growth of RTPV in the city. On the other hand, there have been rare instances where consumers (typically low self-consumption and huge rooftop spaces) have exploited the policy by exporting enormous amoun-ts of excess electricity.

The Karnataka Electricity Regulatory Commission (KERC) released a discussion paper in November 2015 with some proposed revisions in the RTPV policy to address the aforementioned issues. One of the encouraging recommendations in the KERC paper is to replace net-metering with gross-metering or a Feed in Tariff (FiT) for domestic consumers.

Every unit generated by a grid-connected RTPV system will now be eligible for compensation irrespective of consumption patterns. The proposed FiT rate lies between Rs 7.44-7.97/kWh.

Hence, the business case for any domestic consumer becomes viable with a predicted Return on Equity (RoE) of 16%. However, market analysis has shown that there are no developers or system integrators who provide systems at a kWp level below Rs 81,000/kW­p whilst assuring quality and performance (as opposed to proposed benchmark cost of Rs 75,000/kW­p).

Determining an accurate gr-oss-metering rate warrants thorough market research and yield estimation. Every paisa and percentage point matters in India’s solar industry today and it is of utmost importance that the ma-th be correct before any course corrections in policy are made.

Another recommendation in the discussion paper is to link the maximum allowed installed capacity of RTPV systems with the corresponding sanctioned loads for all categories of consumers. The sanctioned load for any consumer is mentioned at the top of every BESCOM electricity bill as “xx HP (sanctioned pump load) + yy kW (sanctioned electrical load)”. The proposed amendment in the policy is that  installed capacity of any RTPV system cannot be more than the sanctioned electrical load.

This should not affect the business case for domestic consumers after the introduction of FiT, although there might be some consumers with rooftop areas large enough to install RTPV systems with capacities more than their sanctioned loads. However, industrial and commercial consumers who will continue to be part of the net-metering scheme will be adversely impacted.

Feasible business cases
Apart from the sanctioned load clause, there is also a proposed cap on the amount of units (50% of generated electricity) being exported to the grid at the specified net-metering rate. Anything more is to be billed at BESCOM’s Average Pooled Power Purchase Cost (APPC) which was Rs 3.97/kWh at generation point for FY2014-15.

Industrial and commercial consumers procure electricity from BESCOM at Rs 5.9-7.95/kWh. With the aforementioned constraints, a study conducted by the Centre for Study of Science, Technology and Policy (CSTEP) shows that only a handful of consumers in the Peenya industrial area and two hypermarkets have Internal Rates of Return (IRR) of around 13.4%. Even these units rely heavily on diesel abatement for feasible business cases.

At a time when there is a major thrust towards RTPV and wi-th the state needing to ramp up its capacity by around 200 times in the next six years, it does not make sense to restrict potential investors. Citing other states’ policies (where RTPV adoption has been minimal and restricted by government-subsidised programmes) and the poor health of distribution utilities as primary reasons behind these constraints is not sound enough.

Researchers from various policy think tanks and institutions are in the process of analysing Karnataka’s RTPV policy regime using sophisticated tools based on Light Detection and Ranging (LiDAR) and Geographical Information Systems (GIS) platforms. The study will calculate the RTPV potential of the state, understand the spread of targets over different consumer categories, prepare an implementation roadmap with policy interventions, and assess the impact on retail tariffs for utilities and end consumers.

Initial results show that revision of net-metering rates and introduction of gross-metering are necessary steps. However, capping capacity at sanctioned load and restricting export to 50% of electricity generation will hinder the growth of RTPV in Karnataka. Further, research is essential before officially revising the state’s RTPV policy with quantifiable and justifiable rate reductions and caps.

(The writers are researchers with the Centre for Study of Science, Te-chnology and Policy, Bengaluru)

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