Is Tamil Nadu on the right track to achieve it’s rooftop solar target? Net Metering Vs Feed-In Tariff, an Analysis

Mon, 01/11/2021 - 11:08
Edition
July - September 2021

Introduction

With 300 sunny days a year and a reasonably high solar insolation i.e, the amount of solar radiation falling on a surface, Tamil Nadu (TN) is among the leading solar energy producers in the country. Given its geographical advantages and the Ministry of New & Renewable Energy’s (MNRE) 40 GW rooftop solar target, the state is promoting the growth and uptake of rooftop solar through various policies and regulations.

Rooftop solar (RTS): Rooftop solar units are a type of distributed power generation in which homeowners, factories, or businesses can install solar panels on their roofs or adjacent open space in their premises to provide for their electricity needs. Solar rooftops help the building occupants fulfill their energy needs and then send the excess energy to the grid. 

 

The solar panels convert energy from the sun into electrical energy for the premises. The power generated from the rooftop solar is Direct Current (DC) and this is converted to Alternative Current (AC) with Inverter. This is sent to the grid at 440/220 Volt three/single phase line depending on the capacity of the system.

Tamil Nadu’s solar energy policy (2019) sets an ambitious target of 3600 MW RTS by 2023. Yet the state’s total installed capacity as of December 2020 stands at 14 per cent of the target.

 

Figure 1: TN’s rooftop solar target vs total installed capacity

Source: Authors’ compilation of data available on TN rooftop solar
 

A review of the percentage growth of RTS capacity addition in TN reveals that it is growing at a slower rate in comparison with other states. Clearly, the state needs to promote accelerated growth and uptake of RTS, with a policy focus that extends beyond industrial and commercial consumers who make up 94% of the RTS users. To do so we need to understand why the uptake of RTS has been so poor.

Table 1: TN’s percentage growth of RTS capacity addition in comparison with the average of other states (2016 - 2020)

Source: Author’s compilation of data available on Bridge to India

The data in Table 1, indicates that Tamil Nadu’s RTS growth fell rapidly from 2017 which was the year the state changed the compensation mechanism, suggesting a correlation between the two. 

Compensation mechanisms

Tamil Nadu Energy Development Agency (TEDA) introduced its first Solar Policy in 2012 in which net metering was brought in. Net metering facilities for commercial and industrial consumers was revoked in 2017 (remember the drastic drop in solar PV system uptake?). The new compensation mechanism for commercial and industrial consumers was net feed-in.

For domestic consumers as well, net metering was followed till February 2019. Then, TEDA introduced the Solar Policy 2019, where net feed-in tariff was introduced as the compensation mechanism for domestic consumers also.

In this blog, we analyze the two compensation mechanisms - net metering and net feed-in from the consumer perspective and draw attention to the mechanism that is more likely to positively influence the growth and uptake of RTS whilst securing the best interests of both the utility and consumers. 

Bi directional meter

Under both net metering and net feed-in mechanisms a consumer must connect their rooftop solar with the utility’s grid. This is known as grid-connected solar PV systems and in this system the consumer must have bidirectional energy meters. Therefore the existing utility's service connection meter needs to be replaced or updated with required software so that the meter measures both energy import (from the grid to the consumer) and energy export (from the consumer to the grid). This allows the consumer to sell the excess energy generated by their solar PV system to the grid. In case their energy generation is less than their use, as they are connected to the grid they can access power from the grid. 

Net metering

Net metering is a mechanism by which an electricity supplier (in this case TANGEDCO)  compensates its RTS user/consumer. How does this work? Since the user/consumer is also a producer of electricity, one needs to track how much electricity the consumer is using and how much the consumer is producing. That is exactly what net metering does. In grid-connected solar PV systems, if the solar energy produced is more than the consumption of the building, the surplus energy will automatically be exported to the TANGEDCO distribution network (the grid). If the solar energy produced is less than building consumption requirement the shortfall will be drawn from the grid (energy import). This will be controlled by the bi directional meter.  

During the billing cycle (incase of Tamil Nadu, it is bimonthly) if the amount of grid energy used is more than the energy supplied to the grid, the consumer pays only for the net energy consumed (i.e., import - export). In a net metering mechanism the excess energy will be adjusted in the next billing cycle when the exported energy is more than the imported. Hence, the energy exported as well as imported is accounted for in the same tariff. And since solar PV systems require an initial investment (purchase of solar panels, etc), net metering helps the consumer reduce the payback period. 

Example: The table below shows the data collected from CAG’s rooftop solar installation. Net metering mechanism is followed to compute the bill. Since TN follows a bi-monthly billing cycle, the months are specified likewise in the table.

 

Table 2: Electricity Bill calculated using the net metering mechanism  for Tariff - V category

Assessment

Entry Date

KWH Reading

KVAH reading

EXPORT

KWH

reading

EXPORT

KVAH

reading

Net Import/ Export units available for billing

Net amount to be paid by a Consumer*

Import (Units)

Export (Units)

Net 

(Units)

January - 2019

470

610

960

990

470

960

-490

-490

Nil

March 2019

1160

1410

1810

1860

690

850

-160

(-160-490) = - 650

Nil

May 2019

2650

3040

2560

2640

1490

750

740

(740-650) = 90

450

July 2019

3730

4260

3150

3260

1080

590

490

490

3944.5

September 2019

4360

4980

3760

3890

630

610

20

20

100

November 2019

4810

5540

4260

4410

450

500

-50

-50

Nil

Total Amount paid in a year

4494.5

* Fixed charges, E-Tax are not calculated

Source: Author’s analysis of an electricity bill 

As per the data above, for January 2019 the import - export came to be - 490 units which means 490 units were supplied to the grid. Hence the consumer need not pay the bill. For May, the consumer has imported more energy compared to export. So, the consumer pays only for the net energy metered units (i.e., import - export). 

Example: Considering the same data from table 2, let us see what will be the bill amount for the tariff I-A (Domestic) category under Net metering mechanism.

Table 3 - Electricity Bill calculated using the net metering mechanism for Tariff I-A category

Assessment

Entry Date

KWH Reading

KVAH reading

EXPORT

KWH

reading

EXPORT

KVAH

reading

Net Import/ Export units available for billing

Net amount to be paid by a Consumer*

Import (Units)

Export (Units)

Net 

(Units)

January - 2019

470

610

960

990

470

960

-490

-490

Nil

March 2019

1160

1410

1810

1860

690

850

-160

(-160-490) = - 650

Nil

May 2019

2650

3040

2560

2640

1490

750

740

(740-650) = 90

Nil

July 2019

3730

4260

3150

3260

1080

590

490

490

1070

September 2019

4360

4980

3760

3890

630

610

20

20

Nil

November 2019

4810

5540

4260

4410

450

500

-50

-50

Nil

Total Amount paid in a year

1070

* Fixed charges, E-Tax are not calculated

Source: Author’s analysis of an electricity bill 

The tables above (Table 2 and Table 3) show a comparison between commercial and domestic categories respectively. The tariff of the commercial category is Rs.5 per unit for the slab of 0 to 100 units (hence the billed amount is 90 units* Rs.5= Rs.450 for the month of May). Likewise, the tariff for the domestic category is Rs. 0 for the slab of 0 to 100 units (hence the billed amount is 90 units* Rs.0= Rs.0 for the month of May). Hence, these two tables show the difference in billing according to categories of consumers.  

Net-Feed in Tariff (Solar policy 2019)

In 2019, TEDA introduced a solar policy with certain updates to further promote rooftop solar uptake. According to this policy, consumers who installed RTS after 2019 will follow the net feed-in mechanism for billing and a bidirectional meter will be installed in the premises for the same. 

Under net feed-in tariff the consumer is paid for the energy supplied to the grid. The energy supplied to the grid and imported from the grid are billed at different rates. This can be higher or lower than the price of per unit electricity and hence its viability varies from state to state. 

In the Tamil Nadu scenario, for the net feed-in mechanism, a consumer who has installed grid-connected RTS between 2019 and 2020 will get Rs. 2.28 for the export of power for the lifetime of the RTS plant. For the import of power, their consumption charges will be calculated based on their tariff category. The amount for the export will vary from time to time and will be fixed based on 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 the last feed-in tariff determined by the Commission 

c) 75% of tariff discovered in latest bidding.

Example: Considering the same data from Table 2, let us see how the bill would be calculated under the Net Feed-in mechanism for Tariff V (Commercial) category.

Table 4 - Electricity Bill calculated using net feed-in mechanism Tariff V category

Assessment

Entry Date

KWH Reading

KVAH reading

EXPORT

KWH

reading

EXPORT

KVAH

reading

Import (Units)

Consumption Charges for Import

Export (Units)

Amount paid by utility for export*

Advance amount

Net Amount to be paid by Consumer**

January - 2019

470

610

960

990

470

3783.5

960

2188.8

1595

March 2019

1160

1410

1810

1860

690

5554.5

850

1938

0

3617

May 2019

2650

3040

2560

2640

1490

11994.5

750

1710

0

10285

July 2019

3730

4260

3150

3260

1080

8694

590

1345.2

0

7349

September 2019

4360

4980

3760

3890

630

5071.5

610

1390.8

0

3681

November 2019

4810

5540

4260

4410

450

3622.5

500

1140

0

2483

Total Amount paid in a year

29008

*For exported units, Rs. 2.28 is provided at 2019 and the billing calculations are done as per the tariff which existed during FY 2019-2020

** Fixed charges, E-Tax are not calculated

Source: Author’s analysis

As per the above data, the consumer has exported more power in January, March, and November than imported, so the consumer was charged Rs. 1595, Rs. 3617 and Rs. 2483 for the respective periods. However, in May, July, and September the consumer imported more energy and exported less energy, so the consumer was charged with Rs. 10,285, Rs. 7349 & Rs. 3681 for the respective periods. 

A comparison between feed-in tariff and net metering suggests that a commercial consumer ends up paying much more when the former compensation mechanism is applied. In this illustration, the consumer would pay Rs. 29,008 for the one-year period under the net feed-in mechanism. Whereas, for the same one-year period and the same consumption, the commercial consumer would only pay Rs. 4,495 under the net metering mechanism. There is a significant difference of Rs. 24,513 between the two. 

Example: Considering the same data from table 2, let us see how the bill would be calculated under the net feed-in mechanism for Tariff I-A (Domestic) category.

Table 5 - Electricity Bill calculated using net feed-in mechanism for Tariff I-A Category

Assessment

Entry Date

KWH Reading

KVAH reading

EXPORT

KWH

reading

EXPORT

KVAH

reading

Import (Units)

Consumption Charges for Import

Export (Units)

Amount paid by utility for export*

Advance amount

Net Amount to be paid by Consumer**

January - 2019

470

610

960

990

470

1010

960

2188.8

-1179

March 2019

1160

1410

1810

1860

690

2984

850

1938

1179

-133

May 2019

2650

3040

2560

2640

1490

8264

750

1710

133

6421

July 2019

3730

4260

3150

3260

1080

5558

590

1345.2

0

4213

September 2019

4360

4980

3760

3890

630

2588

610

1390.8

0

1197

November 2019

4810

5540

4260

4410

450

950

500

1140

0

-190

Total Amount paid in a year

11831

*For exported units, Rs. 2.28 is provided at 2019 and the billing calculations are done as per the tariff which existed during FY 2019-2020

** Fixed charges, E-Tax are not calculated

As per the above data, the consumer has exported more power in January, March and November than imported, so the consumer was not charged anything. The credit amount was added as an advance against consumer service connection and that amount was adjusted in the subsequent billing cycle. However, in May, July, and September the consumer imported more energy and exported less energy, so the consumer was charged with Rs. 6421, Rs. 4213, and Rs. 1197 for the respective periods. 

A comparison between feed-in tariff and net-metering suggests that a domestic consumer ends up paying much more when the former compensation mechanism is applied. In this illustration, the consumer would pay Rs. 11,831 for the one-year period under the net feed-in mechanism. Whereas, for the same one-year period and the same consumption, the commercial consumer would only pay Rs. 1070 under the net-metering mechanism. There is a significant difference of Rs. 10,761 between the two. 

 

Note: Tables 2 and 4 show the difference between net metering mechanism and net feed-in mechanism for Tariff V - Commercial Category. Tables 3 and 5 show the difference between net metering mechanism and net feed-in mechanism for Tariff I-A domestic category which almost falls above 500 units per billing cycle. However, under the Tariff I-A domestic category with different slabs (between 101 and 200 units (or) between 201 and 500 units) the results might be different.

 

Net metering vs net feed-in tariff

As seen from the above analysis, we can conclude that net metering is more favourable to all consumers in Tamil Nadu than the feed-in tariff mechanism. Most consumers prefer net metering as their imported and exported electricity is charged at the same retail price. Net metering may not pay the true value of energy generated but it provides an easier way of calculating the energy consumed which also results in a reduced bill amount; thus, encouraging uptake of RTS among consumers.  

As for feed-in tariff, since it is decided by the regulator, it can be flexible and customized for individual projects taking into account geography, capital cost, installed capacity, etc. In reality, tariffs and other parameters are not customised and there are no options given by the regulator for flexibility. Additionally, there is a huge variance between the compensation and the bill for the consumer under the feed-in tariff. Both these factors adversely impact the willingness of consumers to switch to RTS. Unless the regulator fixes the feed-in tariff taking into account the factors mentioned above the consumer will not receive a  satisfactory price which will further discourage uptake of RTS.

A recent positive change is that the Tamil Nadu Electricity Regulatory Commission (TNERC) issued an order on Generic Tariff Order for Grid Interactive PV Solar Energy Generating System (GISS) dated 22-10-2021. This order says: 

  • Net metering: Net metering is available for the domestic category. Also, the domestic consumer who is billed under net feed-in mechanism has an option to migrate to a net metering mechanism.
  • Domestic consumers under the 2012 policy can also add additional solar capacity not exceeding the sanctioned load and retain solar net metering mechanism
  • Net feed-in or Net billing: The solar energy net billing or net feed-in mechanism will be available to all electricity consumer categories (except hut and agriculture) irrespective of tariff and voltage levels up to the level of sanctioned load/contracted demand up to a maximum capacity of 999 kW.
  • ToD (Time of Day) tariff is introduced and applies for evening peak hours (18:00h – 21:00h). 

Conclusion

Tamil Nadu has set an ambitious target of 3600 MW rooftop solar by 2023.  But, the state’s total installed capacity stands far behind at only 14 percent of the set target. This will require a steep but doable 96 percent growth in two years when one considers the population and number of rooftops across households, businesses, and industries in what is one of the most urbanised states in the country. According to a study by Greenpeace India and GERMI (Gujarat Energy Research and Management Institute), 3015MW per sq km can be easily generated in the Greater Chennai area through rooftop solar. 46% of which can be contributed from the residential sector.

The only push needed in the sector is a consumer-friendly policy with a compensation mechanism that encourages solar uptake. 

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