Solar Firms Almost Unanimous on 10 kW Rule for Net-Metering – It’s a Disaster

Solar Firms Almost Unanimous on 10 kW Rule for Net-Metering – It’s a Disaster

While industry reaction to the new rules from the Ministry of Power that mandates net metering upto a limit of 10 kW only have been well reported, we decided to speak to installers across states to get a broader view. What we see is a very clear divide between a vast number of smaller installers, and a narrow segment of larger players who, on the back of opex+trading models, and clients who will go for solar irrespective to meet ESG goals. The latter tend to get more media visibility, but the truth is, in sheer numbers, and in terms of the broader impact on solar uptake, particularly in the MSME sector, the hit has been very high.

We spoke to installers in states ranging from Karnataka, Andhra Pradesh, Delhi, Haryana, Maharashtra, Rajasthan and Madhya Pradesh for their feedback, and of the 24 owners/operating heads spoken to, 22 cited a major negative impact from the new rules to their business prospects. The two exceptions in our ‘survey’? One has decided to focus exclusively on off-grid solar, while the other will continue to execute smaller residential rooftop projects and explore a diversification away from solar. One can argue whether a sample of 24 is representative enough, but combined with the broader voices we have heard and reported on ever since the issue first came up, we believe this sample is a very accurate depiction of the impact of the 10 KW rule on solar growth, especially rooftop solar.

Thus, when Power Minister R.K. Singh mentioned in the Rajya Sabha yesterday that based on representations received from multiple stakeholders including MSME’s, and it has been decided to carry out amendments in these Rules, one has to hope that these will make the right choices  The amendments will be made in the Electricity (Rights of Consumers) Rules, 2020 after following the laid down procedure.

Three issues seem worth highlighting from our small survey.

One and foremost, that the limit of 10 KW will simply kill the market for larger rooftop systems in the commercial segment, as the ROI on net metering was a key reason for firms opting for rooftop solar in the first place. Especially firms that follow the capex model. A payback period of under 5 years effectively gets extended to between 8 to 10 years with gross metering, a period most firms consider too long considering the ‘untested’ nature of solar rooftop warranties. As existing plants age and demonstrate resilience,  installers with a clean track record will be in a much better position to convince corporates. Thus, among other things, the preferred feedback to shift any such plan to at least 2026 and beyond.

Two, by favouring ground-mounted PV plants over rooftop plants, the government seems to be encouraging an either-or situation for solar power versus other options for land use, including trees. Thus, it makes more sense for the country to push harder for better utilisation of rooftops, for this reason too. the move also strengthens the continued bias of the government for large projects over smaller projects. In markets like the US and Australia, the approach has almost been the opposite, with a heavy focus on smaller projects till recently.

Finally, multiple installers highlighted that they have been using locally manufactured modules, more often than not. With or without DCR(domestic content requirements)  requirements. They claim that squeezing out this market would take away one of the few advantages local manufacturers have, in the form of stringer local relationships and distribution strength.

Among the options suggested, the net feed-in tariff model seems to be the most acceptable one, where the net of power consumption, which would be treated at the same rate as regular power rates, any power sent to the grid would get a lower gross rate.

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