Net Metering and its Impact on Investment
Net Metering and its Impact on Investment
At ‘COP 27’, India as a forerunner in the Global climate action plan, has set an aggressive plan to reduce its emissions intensity by 45% by 2030, from the 2005 level and have pledged that 50% of its installed electric power capacity will be from non-fossil fuel-based energy resources. India also strives to be net-zero by 2070.
These are not simple statements. Rather, they need concerted efforts from government, private sector, society/ community and individuals. In this direction, solar roof-top projects, both stand-alone and grid connected, are quickly gaining momentum.
Solar power scenario in India
India as an emerging economy has progressed considerably towards achieving power for all household in last two decades. From a combined installed capacity of 112 GW as of the end of 2000, 170 GW in 2010, it has increased to 417 GW in 2023, at a CAGR of 4.3% and 7%. The pace of development accelerated rapidly in the last decade..
During 2010 to 2023, installed capacity of solar power has increased from 0.16 GW to 72.3 GW, a CAGR of 60%. The acceleration in the adoption of solar is evident.
With a target of 500 GW of installed renewable energy by 2030, including 280 GW of solar and 140 GW of wind power, the target is steep. However, India as a country with over 300 million household provides ample opportunity to generate roof top solar power from residential space. Similarly, the opportunity to generate solar power from office premises, industrial complexes is enormous.
As per certain market information, the residential rooftop solar installed capacity in India as of June 2023 has been 2.7 GW, which is around 3.7% of overall solar capacity. Further, India’s total (residential + commercial + industrial) rooftop solar installed capacity is about 11 GW as of October 2023. Further, India is targeting a total rooftop solar capacity of 40 GW by March, 2026.
The driving force behind roof-top solar
There are several factors like, self- reliance on power generation for internal consumption, availability of financing options, access to solar roof top technology, cost economics etc., that drive roof top solar projects. However, one important aspect in this drive is Net Metering.
Net metering allows individuals with solar panels to connect to the grid. Excess electricity generated is fed back, and users receive credits for this contribution. These credits offset future electricity consumption, promoting renewable energy adoption. A two-way meter measures both grid electricity usage and solar generation. Users are billed only for the net electricity consumed, potentially resulting in credit or payment for excess generation. India's policy landscape regarding net metering is governed by the amendment to the Electricity (Rights of Consumers) 2020 rules. These rules permit net metering for prosumers to upload the generated power, in case they meet the specific guidelines of the state.
The Ministry of New and Renewable Energy (MNRE) in India provides subsidies to incentivize the installation of solar rooftop systems. The Central Government subsidizes the benchmarked installation cost of roof PV systems by 40% in some states, while special category states receive a higher subsidy of 70%. The target for solar rooftop installations by the fiscal year 2022-23 was 8 lac users, and the subsidy distribution was also proportional.
Investment prospect in solar rooftop:
Adroit believes that to attain the 40 GW of solar rooftop capacity by 2026, this solar sub-sector would require an investment of Rs. 1.3 trillion at current cost structure. Additionally, there will be investment requirement in the electric utility sector to accommodate and manage the additional capacity. This may include, various storage devices like, Battery-based Energy Storage Systems (BESS) and Pumped Hydro Storage (PHS), sub-station capacity, transmission capacity etc.
A majority of this investment of over a trillion rupees is expected to be through private funding, supported by debt from financial institutions. Several innovative investment models have already emerged,
Utility Focused ModelThe availability of technical know-how, improved efficiency, diminishing cost per unit capacity, financial liquidity are expected to drive the sector in the medium term. We can expect more innovative financial products in the days to come to bridge the gap.