The recent announcement of the solar rooftop tariff revision in the state of Karnataka has not gone very well with the general public even as they were expecting the tariffs to be reduced eventually. Tariff revision seemed to be an obvious move considering the ever decreasing cost of the solar power system and the recent solar bid results dint quite justify the prevalent tariff of INR 9.56 which is more than double the lowest tariff in the country with knowledge of the fact that the scale and projects are totally different.
The new tariff
The tariffs are differentiated and low compared to the previous order of 2013.
But the biggest announcement of the order came in the form of gross metering for domestic, hospital and institutional consumers.
Why is gross metering good for residential consumers?
The initial reaction to the tariff revision was surprisingly negative, with the so called industry experts calling KERC’s new tariff as a deterrent to the expansion of solar rooftops in the state but the gross metering policy will only aid the development of rooftop projects in the state. Gross metering will pay for every single unit of solar generated on domestic rooftops at the agreed price unlike the previous net metering scheme where consumers were paid for the excess sold over a billing period.
In short, consumers will be paid more for every solar unit they generate compared to every single unit they consume from the utility. The current tariff for domestic consumers in Bengaluru is between 3-6.90 INR. A quick calculation shows the slight benefit an average consumer stands to gain with the new policy. The energy consumption numbers are conservative and the savings with gross metering will be higher than these on average.
And for the utilities
The utilities will be disappointed considering that they will be losing the extra revenue in terms of the energy the consumers will not be consuming. Since the consumption will go down for consumers they will also consume in the lower slabs of electrical tariffs and will be paying lower tariff.
In addition to losing out on energy revenue, utilities will also be paying up for the solar generation in totality. That will definitely be an added burden and for the utilities who have been complaining for a long time on losing out on consumers through the Open Access regulation.
Why is this a bad precedence?
Solar rooftops should definitely be incentivised but not at the cost of utilities. We have enough evidence of how such tariff regulations have failed in the long run in many places and is not sustainable. Germany, UK and even a few states in the US went this way in promoting solar with high Feed In Tariffs and then had to reduce or remove FiTs which then dint go well with the consumers.
The commission could have rather kept the new tariffs on par with the existing utility tariffs with similar slabs which wouldn’t have been harsh on the utilities. The tariff structures need a rethink, instead of tilting the favours towards consumers the regulators can balance the situation by favouring the utilities in terms of tariffs but seeking a commitment in terms of service delivery or penalising on default of service.