New consumer rights rules may hit rooftop solar capacity addition

The latest rules regarding the consumer rights laid down by the Union power ministry is seen to impede the pace of capacity addition of the rooftop solar in the country by disincentivising commercial and industrial users from installing such power generation capacities in their premises.

While such consumers were earlier earning around Rs 7/unit by selling the surplus power generated from their rooftop solar plants to the state-run power distribution companies (discoms), under the new mandate they will be billed through “gross metering”, and compensated at rates close to the average power purchase cost of discoms which ranges around Rs 3.5– Rs 4/unit.

The national solar energy federation of India has requested power minister RK Singh to amend the provision on gross metering for larger rooftop consumers, pointing out that “investment to the tune of Rs 1,500 – 2,000 crore is either under contract or under commissioning phase” for such rooftop capacities and the new mandate “will create uncertainty and impact the ongoing projects”.

Out of the total solar capacity of 36,910 MW, only 3,402 MW currently comes from rooftop solar. The government aims to have 40,000 MW of rooftop solar capacity by 2022.

At present, the commercial and industrial consumers with rooftop solar capacities export anywhere between 5-50% of solar power generated during the day to discoms at prevailing retail rates. However, after the new provisions are implemented, the return of investors in rooftop plants will significantly reduce, giving them no reason to spend money on installing rooftop solar plants.

“If the government does not provide the export provision under the new rules, going ahead hardly 100-150 MW of rooftop power will get added to the system against 600 MW that we saw in 2020, completely negating the growth of the industry players and increasing the client payback time from 3-4 years to six years at least,” Puneet Goyal, founder of solar firm SunAlpha, told FE. Almost 85-90% of the new capacities that would have come to commercial and industrial segment will be completely wiped out because of gross metering provisions, Goyal added.

The new provisions are seen to help the ailing state-run discoms which are reluctant to let go of their higher-paying commercial and industrial consumers. “It is a balancing act as net metering for commercial and industrial users will ultimately result in higher tariffs for the residential consumers,” a senior discom official told FE on conditions of anonymity. “When high-paying commercial and industrial users start buying less power from discoms, low paying consumers like residential customers will end up paying more,” the person added.

(with inputs from Anupam Chatterjee in New Delhi).