As on May 2019, Tamil Nadu has achieved only around 45 MW of rooftop solar with net meters and 134 MW without net meter facility1. This is a far cry from the targets of Solar Policy 2012 which had aimed for around 350 MW of rooftop solar by the end of 2015. Tamil Nadu announced its new Solar Policy in February 2019 and with that, the sun has set on the Solar Policy 2012. . This Policy has an even more ambitious target with a state-wide capacity of 9000 MW by 2023, of which 5400 MW is targeted from the utility category, and the remaining 3600 from the consumer side. The Policy has a number of enabling provisions for those that fall within the “consumer category systems” by bringing them in the net metering arrangement. However, the Policy cannot be seen in isolation but in association with regulatory, financial, technical and administrative processes which may have a greater implication for achieving targets.
The highlights of the Solar Policy 2019 from a consumer’s perspective are straight forward and bring in the concept of net-feed in and gross feed in. Consumer category systems (5.2.2) are systems where “the objective is self-consumption of solar energy and export of surplus energy to the grid. For these systems, the grid connection is through a consumer service connection of a distribution licensee”.
Under the net-feed in tariff mechanism, the instantaneous export of surplus solar energy, that is not absorbed by a building’s electricity demand will be compensated for by a net feed-in tariff. More importantly, solar net-feed in will be available to all low-tension consumer categories, subject to TNERC Regulations. For this purpose, the Policy details a bi-directional meter to be installed by the consumer to quantify the export and import of power generated. Under the gross feed-in mechanism, the entire power produced by the consumer is fed into the grid and will attract utility category tarriff. Further, gross feed-in is available for all consumer categories at any voltage level. The cost of power exported by consumer, under both the categories, who have installed the solar panels, or the prosumer, will be determined by the Tamil Nadu Electricity Regulatory Commission (TNERC). It is notable that this Policy does not specify consumer category in relation to the type of consumer but in terms of kilowatt (kW) threshold. Here, Section 7.2 of the TNERC Order has limited it at 112 kW.
It is notable that the tariff has mentioned that all meters going forward should be made bi-directional. This eliminates the need for replacement and ensures that all meters are solar ready meters.
In terms of feed-in tariff, TNERC has fixed the net feed-in tariff by its order dated 25-03-2019 (Order on Rooftop Solar Generation) based on the revised accounting mechanism. The tariff has been fixed as the lowest of the following: a) 75% of the pooled cost of power purchase notified by the Commission under the Renewable Energy Power Purchase Obligations, 2010, b) 75% of last feed in tariff determined by the Commission c) 75% of tariff discovered in latest bidding, whichever is less. As per the TNERC, this tariff works out to Rs. 2.28 per kWh for the financial year 2019-2020, which is 75% of the Solar Tariff Order. The gross feed in attracts the utility category tariff i.e. Rs. 3.04 per unit (TNERC’s Solar Tariff order 2019).
Other enabling aspects of the Policy include introduction of time-of-the-day tariff (TOD) (9.2), where, solar energy feed-in tariffs encourage solar energy producers and solar energy storage operators to feed into the grid when the energy demand is high. The basis of this approach is that solar energy can be produced only during day time or when the sun shines. It may be entirely possible that the utility may need the electricity during evening when demand increases. Given that transmission of power is instantaneous, electricity needs to be stored either in batteries or evolving storage systems and technologies. On the other hand, electricity distribution companies may be willing to pay to buy the stored power at a reasonable price for supply when demand is high. However, TNERC is yet to come out with a tariff order for ToD.
Further, to enable easy uptake of rooftop solar, two models of ownership or implementation models have been proposed: a) upfront ownership and b) deferred ownership. The upfront ownership is when the consumer pays and buys rooftop solar panels. The deferred ownership model can be viewed in two ways: a) a lease model where the rooftop or ground space is taken on lease by the solar service provider or supplier, or b) the purchaser can opt to own the solar panel based on performance based payment or a mutually agreed event.
The Policy has directed Energy Conservation Building Code (ECBC) to be made mandatory and further directed that installation of solar panels to ECBC compliant buildings is a must. A partial incentive has been put in place, whereby the consumer category solar will be exempted from electricity duty for two years.
In terms of operational features, the Policy has been clearer and more forward thinking than the previous policy by increasing the system capacity at the service connection point to 100% of the sanctioned load.
Additionally, the Policy has left it open to the regulator- TNERC- to arrive at the cumulative solar PV capacity at the distribution transformer level to enable solar energy penetration.In the March 2019 order, TNERC has allowed “90% of the distribution transformer capacity on the basis of a first come first served” as against its earlier order in 2013 where, it had stated that the solar PV penetration at the distribution transformer level should not exceed 30%.
What was omitted?
The Draft Solar Policy 2018, released in October 2018, sought to democratise the market by making solar net-feed in, group net feed-in, virtual net-feed in and gross feed “available to all electricity consumer categories and tariffs and for electricity service connections at any voltage level”2. However, in the final Policy and further regulatory orders, there was a marked segregation in terms of utility category systems and consumer category systems, those especially those who can avail net-feed in and gross feed respectively.
The virtual net feed-in mechanism was an innovative step which sought to give access to the solar net feed-in facility for consumers who do not have a suitable roof for installing a solar system (e.g. residential consumers who live in apartments, consumers with shaded rooftops). According to the virtual net feed in arrangement, these consumers (e.g. trusts, companies, societies etc) can be beneficiaries or owners or shareholders of a “collectively owned solar system”. The energy produced by the solar plant will be treated as energy exported by the group of consumers and will be “credited pro rata in the electricity bill of each participating consumer on the basis of beneficial ownership”. They will be treated as net feed-in for these consumers and “will be available to all electricity consumer categories and tariffs and for service connections at any voltage level”. While group net feed in would have allowed excess rooftop generation to be exported and net feed in “adjusted in any other (one or more) electricity service connection(s) of the consumer” in Tamil Nadu.
Unfortunately, the above solar virtual net feed-in mechanism was not adopted; this would have been a good move by Tamil Nadu, following Pudhucherry and Delhi, and would have opened up the solar market to innovative business models and institutional arrangements. At the time of the draft policy, there was palpable excitement among various developers in anticipation of this model. So much so that solar installers/developers had started reaching out to groups of consumers, mostly apartment blocks for the same.
Pain Points in the Solar Policy, 2019
Firstly, as mentioned above, it is important for TNERC to come out with the TOD tariff at the earliest in order to develop the energy storage market.
Secondly, the TNERC’s Regulatory Order of March 2019 sought to equate rooftop solar with utility scale solar plants for net and gross feed-in mechanisms by stating that “the price of purchase of energy exported to the grid by the SPGs commissioned under the Solar net feed-in during a financial year shall be at 75% of the pooled cost of power purchase notified by the Commission for the respective financial year in the orders issued on pooled cost of power purchase under Renewable Energy Power Purchase Obligations, 2010 or 75% of last feed in tariff determined by the Commission or 75% of tariff discovered in latest bidding whichever is less.” Solar tariff, competitive bidding and pooled cost of power purchase under Renewable Energy Power Purchase Obligations are meant for large / utility scale plants, which cover hundreds of solar panels. It is a common economic knowledge that cost of producing one unit cannot compare with costs of producing 100 or even 1000 units as economies of scale will operate to reduce the cost of setting, production and operation of such entities. In the same manner, equating the costs of a single rooftop plant with that of a utility scale solar plant enjoying considerable economies of scale is puzzling. According to calculations, the present feed-in tariff structure does not even cover 50% of the actual cost of rooftop solar. TNERC should consider a relook of its order! Further, this approach goes against the Policy 2019 where it specifically states that “solar energy gross and net feed-in tariffs will be determined by TNERC taking into consideration different capital costs based on the solar system capacity”.
Thirdly, TNERC, in its March 2019 Order, has mandated the installation of an additional meter i.e. solar generation meter (Section 5.1) that “shall be placed after the inverter at the ground floor of the premises to facilitate easy access for meter reading”. The purpose of this meter is for “measuring solar power generation”. There are practical issues connected with the installation of solar generation meter. For example, supposing an educational institution, having a large campus and LT connection, wants to install rooftop solar on one of its premises and the service connection meter is placed at the entrance, then the solar generation meter will also have to be placed beside it. For this purpose, a long cable which will be prohibitively expensive for the consumer will have to be put up. This may potentially exceed the cost of the solar panels! On the other hand, it has become the standard among solar developers to give enough web related applications to measure the solar generation without the necessity for a solar generation meter. TANGEDCO, in its circular, has made the installation of the solar generation meter optional for the time being.
Further, Section 5.2 of the TNERC Order states that solar generation meter, “will help the licensee for demand forecasting and also for computation of total solar generation in the State”. It should be noted that for solar energy generation forecasting can be done using type of solar panels used, daily weather conditions, irradiation data, etc. As a result, present day’s forecasting cannot be done using previous day’s generation data.
With regard to the mandatory purchase of renewable energy by the TANGEDCO, under the Renewable Energy Purchase Obligations (RPO), TNERC has taken a contradictory stand from the Solar Policy 2019. The Policy clearly states that energy injected into the grid by the electricity consumer “can be claimed by the distribution licensee towards fulfillment of their Renewable Energy Purchase Obligations (RPO)”. However, Section 11.1 of TNERC’s March 2019 Order states that “Net injection of power is not eligible for Renewable Energy Certificates (REC). The energy generated from Rooftop Solar power plant shall be accounted towards fulfillment of RPO obligation of distribution licensee”. It is obvious that the latter condition by TNERC cannot hold good as it has not taken into consideration self consumption by consumers which cannot account for RPO.
Fourth, the Draft Solar Policy 2018 had suggested exemption of solar energy from electricity tax. While, in the Solar Policy 2019, this exemption is extended for only two years. There is a lack of recognition that solar energy is a benign source of power requiring promotion by all stakeholders. There should be an additional point to be noted by policy makers that solar energy is offsetting the cost of externalities (air, water and soil related pollution) by thermal power plants. In this regard, taxing such sources in the form of duties especially electricity duties after couple of years may need to be revisited as it goes against the commitment by Act 2003 and larger international climate change commitments.
Finally, as per TANGEDCO’s circular dated 17.02.2014, which is still in vogue, it is mentioned that safety inspection by Electrical Inspectorate officers “of Solar PV System of 10 KW and above by the Electrical Inspectorate takes place….through close co-ordination with the Electrical Inspectorate”. This administrative red tape can lead to delays in commissioning of solar PV systems and fixing of net meters, which will slow down the growth of rooftop solar. Ideally, the inspection of the Electrical Inspector should be limited to solar PV systems of more than 100kW, in line with voltage level threshold for Low tension (LT) consumers as per the latest TNERC orders. For LT consumers, it is enough that inspection may be done by the TANGEDCO Section Officer / Assistant Engineer. This will ensure timely commissioning of solar PV systems.
The above policy, which aims to achieve 3600 MW of rooftop solar under consumer category, may still remain a paper tiger. given the above policy, regulatory and administrative hurdles
This article acknowledges the comments and inputs given by Martin Scherfler, Co-founder, Auroville Consulting.
1 As per RTI information received on June 2019
2 8.1.5. Solar energy group net-metering: To encourage solar plants on rooftops of buildings that cannot consume all of the energy generated locally, there shall be Group Net Metering, whereby surplus energy exported to the grid from a solar plant in excess of 100 percent of imported energy at the location of the solar plant can be adjusted in any other (one or more) electricity service connection(s) of the consumer within the State of Tamil Nadu.