Rooftop solar has a bright future

India’s goal of having 100 GW of solar power by 2022 has already generated a lot of interest, and scepticism. But it’s even more far-reaching part pertains to the fact that 40 GW out of this is going to be based on distributed energy generation, namely solar rooftop systems.

These solar rooftop systems could be set up at residences, at industries, at commercial buildings, or on the airport terminals. The capacities range from a few kilowatts to megawatts. There have been ongoing discussions and debates on their feasibility. The country had around 525 MW of solar rooftop systems by October last.

The one thing that has been clearly established is the crucial role of electricity regulators as well as the distribution utilities (discoms). Be it the connectivity to the grid or the net-metering arrangements or the tariff paid for surplus solar electricity fed into the grid by the consumers, Discoms have become central in solar rooftops’ rollout.

Interestingly, with the advent of roof-mounted solar systems, retail electricity consumers are metamorphosing in to a dual role: an electricity consumer as well as a generator.

There are enough indications worldwide that electricity sector is fast undergoing fundamental, structural changes; changes that might impact the very business model of the utilities. And one always resists change, more so if it happens to be a fundamental one.

The risk perception of discoms stems from the belief that if a sizeable consumer base – especially in higher tariff categories like commercial and industrial — shifts to solar rooftop systems, it would result in revenue loss.

This is because while on one hand the demand for grid electricity reduces, on the other discoms would still have to invest into, and maintain, the electricity supply infrastructure. In India, there is cross-subsidy to contend with.

In many States commercial and industrial consumers provide subsidise electricity consumers in agriculture and residential sectors. So in a sense wide-scale adoption of solar rooftop systems by commercial and industrial consumers could impact the financials of discoms.

This, however, needs to be put in perspective taking into account (a) how would solar rooftop systems complement discoms’ endeavour to reduce aggregated losses (it has been estimated that 1 kWh generated and consumed at the point of consumption/load centre can help obviate supply of 1.5 kWh for meeting the same load) and (b) the reduction in having to buy expensive electricity, especially during peak hours.

Moreover, the surplus electricity can be utilised in myriad of ways, for instance for more lucrative inter-state trading or to meet unmet/latent demands. The point essentially is to analyse all the possible scenarios and work out the `net’ impact.

Utilities in places such as Hawaii, California, Nevada, New York, Georgia, and Germany have reacted differently to solar rooftop ingress. It may be important to distinguish these utilities from those in India. The aforementioned utilities are composite ones that take care of all the functions of electricity supply, from generation to distribution.

In our case, we have had unbundling so that there are utilities for generation, transmission, and distribution respectively. And because of this distinction, discoms here would be differently impacted from a utility, say, in California. Electricity regulators there have tried to address these concerns in a different fashion.

So for instance the state of Nevada more than tripled a monthly fee customers need to pay to the utility for rooftop solar projects.

The California Public Utilities Commission, on the other hand approved a programme maintaining a full retail net energy metering (NEM) structure that allows all customers to receive full credit for renewable energy that they export to the grid, but also establishes mandatory time of use (TOU) rates for those customers.’

In a far-reaching verdict, the Supreme Court of the US upheld a Federal Energy Regulatory Commission rule that allows homes and businesses to get paid for energy conservation when demand on the power grid is very high.

These examples provide important lessons to us, which if properly adapted, could help India in leap-frogging in this emerging space. Besides, the private utilities are trying out new business models, not only for their own survival but also to take advantage of emerging scenario.

Thus, the Georgia Power, a subsidiary of Southern Company of the US, launched its own branded solar rooftop business.

Likewise, after losing billions of euros in conventional electricity generation business once Germany moved to Energiewende, its mega utility RWE forged a partnership with solar developer Conergy to offer solar rooftop solutions.

There is no denying the fact that sound financial health of discoms is crucial for electricity supply system to function smoothly.

On the other hand there is India’s commitment to pursue low-carbon pathway of which solar rooftop systems are a key element.

What is required, therefore, is fine balancing of near-term and long-term goals. While discoms themselves explore transformational business models in order to remain afloat, and relevant; proactive regulators and transparent political direction would be the key to this convergence.

Thus, rationalisation of tariffs across all the categories would automatically obviate the need for tariff-based cross-subsidisation.

In addition, the government may think of incentivising discoms in some ways thereby accelerating the deployment of solar rooftop systems.

While those discoms that join UDAY may have some additional benefits commensurate with their performance in this area, for other discoms there could be some point-based system helping them to improve their credit rating.

The writer is with TERI University