Government Policies and Regulations for Solar Energy in India: Challenges And Solutions
India had increased its target for renewable energy to 175 GW in 2015 out of which a target of 40GW was assigned to the Rooftop Solar PV segment. Unfortunately, the rooftop solar sector has been fettered with slow growth. India had installed 6.8 GW of cumulative rooftop PV capacity by the end of 2020, with consumer-owned systems accounting for about 72% of the total, according to Bridge to India.
The slow growth in the segment is attributed to various reasons such as:
➽ Regulatory hurdles
➽ Lack of uniform regulations
➽ Lack of mandatory notifications / state policies
➽ High cost of financing
➽ Reluctance from DISCOMs to provide approvals
➽ Multiple approvals from multiple stakeholders
➽ Availability of net meters
➽ Absence of single window clearance, etc.
The main challenge lies in the differences in net-metering regulations and sometimes between DISCOMs in the same state. For example, in Uttar Pradesh, rooftop solar policy and regulation allow net metering only for residential consumers but not for commercial & industrial sectors whereas Maharashtra allows net-metering to all categories of consumers with a cap of 1MW. Further, some states have laid caps on generation from rooftop systems such as Punjab and Haryana have capped generation from solar at 90% of the annual consumption for all consumer categories. On other hand, Rajasthan has put a cap on generation, i.e., 4.8 units per kW and in case of excess generation at the end of the year, only residential consumers are given monetary compensation.
The second major challenge is constant change in regulatory position by states. In November 2019, Maharashtra Regulator published Draft Regulations in which it proposed to allow net-metering only for the residential consumer(s) of less than 10kW capacity. In the final regulations published, it reversed its position and allowed net-metering to all categories of consumers but proposed Grid Support Charges (GSC) for such net-metering systems. As against the MSEDCL’s proposed high GSC, the Commission waived off GSC till the time State achieves 2000MW of rooftop solar installed capacity, but decided to levy banking charges of 7.5% for HT consumers and 12% for LT consumers. Such decisions do adversely impact investor sentiments in the rooftop solar sector in the State.
The third major issue is with the definition of third-party-owned systems, popularly known as Opex or RESCO models. While Gujarat has not allowed third-party-owned systems in its solar policy, Maharashtra has permitted such ownership to only leased systems. A few other states have their interpretation of third-party-owned systems which limits penetration only to Capex mode of investment.
Recently, the Draft Electricity (Rights to Consumers), 2020 released by the Ministry of Power proposed that the consumer has the right to net metering only for loads less than 5 kW beyond which only gross metering is applicable. This would greatly reduce the flexibility available for consumers wishing to install rooftop solar systems. It is sincerely hoped that the Ministry will amend this provision to allow net metering up to contract demand with a reasonable limit such as 1MW.
Such non-uniformities and frequent regulatory changes bring significant uncertainty to the sector thereby hindering the progress of the grid-connected rooftop solar segment and investment into the sector. Uniformity in government policies and regulations for Solar Energy in India shall attract more investment and help the country reach the target of 40 GW.
