As expected, I did receive some critical comments from peers on the professional platform for my last post, Karnataka Solar Rooftop Story (Read more). I did however clarify, that I believe gross metering is a good incentive for domestic rooftop projects, but I’m not convinced with the tariff set.
Electricity markets are undergoing a second round of transformation after the first one in which the vertically integrated utilities were unbundled and regulated. In this phase utilities are grappling with high penetration of renewable energy in the grid mix and also a need to adopt and offer smart technologies to consumers to remain relevant. There are cases where utilities like in Karnataka (Read more) and around the world have gone forward with Renewable Energy (RE) expansion and then deciding to pull the plug.
Here is a small representation of the systems and feedback in an electricity market.
Industrial consumers in a deregulated market
My first experience in market feedback was in the industrial sector. Open access is a good policy that allows independent consumers to source third party power but it has its own drawbacks.
- As industrial tariffs increase, businesses look for alternate sources in the market to reduce their power cost. An influx of cheaper renewable power especially in a country like India where wind power is cheaper than the industrial tariff, more industries who have the technical feasibility and the demand have opted for it.
- The increase in industrial consumers opting for open access for their power requirement means the utilities are not selling a projected quantum of their energy estimates and are losing revenue.
- A loss in revenue eventually results in an increase in tariff.
- An increasing tariff will be just what the third party power sellers had projected and so there is an increase in consumers opting for open access.
Solar PV and residential consumers
Although the revenue loss from losing industrial consumers is significant, if a high portion of consumers adopt to domestic rooftops the revenue loss to the utility can’t be ignored.
- The systems and markets would work like in the same way, but whereas the increase in consumers adopting for domestic solar rooftops is not just driven by high retail tariffs, it is also driven by the incentives like feed in tariffs/net/gross metering.
- An increase in domestic rooftops means the utility is selling less energy and losing revenue and hence will be driven to increase the tariffs.
- Adding to their burden will be an obligation to pay a high tariff for gross/net energy fed through the domestic rooftop.
Overall, the electricity market, the system and the associated feedback is evident and being keenly observed by the utilities and policy makers alike. It will take some key policy interventions in tariff structures and time for it to settle, however it can also be prevented to an extent by not overly incentivising renewable energy across all levels without modifying the existing electricity market .
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