Bi-directional Smart Meters & Feed-in-Tariff Mechanism

The article describes a fool-proof revenue protection solution that embraces a combination of methods – such as (a) Use of bi-directional smart meters coupled with analytics services (b) Restructuring the distribution system into 11 kV feeder level Co-operatives, and (c) Replacing Net Metering....

 Minimal changes in meter specifications drafted by various Indian electric utilities over the past few years lead us to believe that electricity metering and metrology technologies are commoditized. We consider this strange, particularly, when entire electricity consumption is not yet being measured and accounted for. Moreover, in such a scenario, it makes little sense to believe the low aggregate technical and commercial (AT&C) losses that are projected by the utility engineers, particularly, in front of the Electric Regulatory Commissions (ERC), to demand a hike in tariff rates. It has been more than a decade since the various Indian state utilities have been restructured into separate generation, transmission and distribution entities. Yet improvements in the quality of supply or tariff rates (that an Indian consumer relates to), are minimal.

  On the other hand, in the international scenario, over the past 15 years, the energy metering industry abroad has witnessed multiple waves of change, each with a scope and size not seen earlier for over a century. The transition from electromechanical to electronic meters was quickly followed by automatic meter reading (AMR) systems which in turn evolved into advanced metering infrastructure (AMI) systems which led to the formation of Smart Grids. The AMI systems are associated with higher speeds, two-way communication, and the ability to deliver large amounts of data to central databases for billing, troubleshooting, and analysis. The AMI systems saved manual reading of millions of meters, improved business efficiencies due to drastic reduction in labour hours, improved access, gave better measurement accuracies, lowered losses, reduced the down time, and lowered environmental impact.

  For the Indian electricity utilities to implement AMI and witness similar benefits, the ground situation is quite challenging. The scenario is made more complex with an unprecedented growth in numbers of decentralized, small, utility grid connected, distributed energy resource systems (DERs). These DERs offer a host of benefits such as reduced T&D losses (due to local generation/less site specific), zero pollution, lower maintenance, less complexity and lower cost of regulatory oversight.

  Grid parity is a point at which the DER can generate electricity at a Levelized Cost of Electricity (LCOE) that is less than or equal to the end consumer’s retail price (see Figure 1). Since 2013, most of the DER systems have reached grid parity – wind reached grid parity initially in 2010, and soon followed by solar Photo-Voltaic (PV). Reaching grid parity is essential for an energy source to be a contender for widespread development without subsidies or government support. The continual drop in the rates of PV cells has been a catalyst for growth of solar generation to such proportions that solar DERs are occupying a major share in Europe, Australia, and US.

Figure 1: Levelized Cost of Electricity for DERs

  However, for India to avail the numerous advantages that solar DERs offer, it is important to address the major concern that utilities have in tariff administration, metering and billing. This paper addresses these concerns using two new concepts – (a) Cooperatives and (b) Bi-directional meters with AMI.

Figure 2: Drop in LCOE for Solar Photovoltaics

Compensation Mechanisms for Solar DERs

  Though we have elaborated on the three tariff compensation mechanisms in context to solar PV earlier, we observe that often their names are still used interchangeably, leading to confusion. Hence, for clarity we describe them again below:

1. Power Purchase Agreement (PPA), also known as the ‘Standard Offer Program’ offers compensation that is generally below retail. 
2. Feed-in Tariff (FiT) that is usually set initially above retail and reduces down to retail as the percentage of solar adopted increase.
3. Net Energy Metering (NM) which is always at retail. Since the DER is mostly used for own consumption, technically, it cannot be termed as compensation, although it may be considered so if there is excess generation and if utility is allowed to make payments for the same.

Power Purchase Agreement (PPA)

  With the PPA, a developer installs a PV system on an agency property under an agreement that the agency will purchase the power generated by the system. This allows the agency to fund PV projects without incurring up-front capital costs and pay for the system through the power purchased every month for the life of the contract, while the developer installs, owns, operates, and maintains the PV system over the same contract life. Under the PPA mechanism, the energy generated and the consumed by the agency / consumer are metered separately using two meters, namely, the PPA meter and the standard consumer meter respectively (see Figure 3). Due to this independence, neither the agency nor the developer need to be a consumer of electricity. The PPA solely binds the agency and the developer, and therefore, is outside the scope, jurisdiction, and purview of the ERCs.

Figure 3: Parallel Connected Power Purchase Agreement (PPA) Meter

Feed-in Tariff (FiT) System

  Feed-in Tariff (FiT) schemes are typically based on a 15 – 20 year contract where prices are pre-defined above retail with a tariff degression, which effectively reduces the earnings over time. In the FiT, you get paid for every kWh you generate under an FiT contract. The FiT system uses a separate meter called a FiT meter (see Figure 4) in order to measure the outflow of electricity generated from renewable energy on the consumer’s premises independently. The FiT meter is usually uni-directional.

  The electricity consumption is measured by the Standard meter which is a bi-directional meter (see Figure 4). The separation of electricity generation and consumption using two meters enables each to be priced separately.

Figure 4: Series Connected Feed-in-Tariff (FiT) Meter Connections

  Unlike the meter connections under the PPA scheme, in case of the FiT, it is possible to identify how much kWh units consumed by the consumer has been generated by his own PV system at any particular instant of time. Since only the surplus energy generated by the PV at any instant of time gets exported through the Standard meter, it is possible to have a tariff rate applied to the surplus energy that is different from the rate applied to the total energy generated by the PV system.

  The FiT systems are popular for solar generation in several European countries including Germany. In order to boost solar power, German utilities once paid several times the retail rate for solar, but has successfully reduced the rates drastically while actual installation of solar has grown exponentially at the same time due to installed cost reductions. Since the German system pays what each source costs with a reasonable profit margin, wind energy, in sharp contrast, only receives around a half of the domestic retail rate. As a result of these measures, Germany has the highest PV installed capacity of 39 GW (as on 2015) of which 71% is in the rooftop segment. The PV Watt per Capita is also the highest in Germany at 491 (whereas it is only 4 in India).

Net Metering

  Net Energy Metering or simply Net Metering (NM) is a service offered by the local electric utility to an electric consumer under which electric energy generated by that consumer and delivered to the local distribution grid may be used to offset the electric energy provided by the electric utility to that consumer during the applicable billing period. Unlike FiT, the NM requires just a single bidirectional energy meter (see Figure 5).

Figure 5: Net Energy Metering (NM) Meter Connections

  Though the NM policy is designed to foster private investment in the renewable energy, it varies significantly by country and by state: if NM is available, if and how long you can keep your banked credits, and how much the credits are worth in retail or wholesale. In general, the NM policy involve a monthly roll over of energy (kWh) credits, a small monthly connection fee, monthly payment of the deficits which is the normal electric bill, and annual settlement of any residual credit.

  In USA, net metering is popular in 43 States. The US Energy Policy Act 2005 mandates all public electric utilities to make net metering options available to all the customers. California has over 1 lakh net metering consumers with maximum solar capacity of 991 MWp. The NM policies are far more popular than the FiT policies in the US and in Japan.

Net Metering Issues Hampering PV Proliferation in India

  Today many Indian states are still struggling with their roof-top programs while Germany has succeeded with it two decades back. The German FiT policy has resulted in a 40% drop in the price of electricity rates at peak times, and is considered to be most effective at accelerating renewable deployment. One of the main reasons for Germany’s success is the non-discriminatory manner in which it offered long term contracts to all the renewable energy producers on a cost plus basis with 5-10% return.

  In sharp contrast, India has been discriminatory in its solar policy while offering contracts. All solar programs initiated in India fall under the PPA category or more recently under the NM category. Though the NM policies have been successfully implemented in US, we show below that it is not suitable for India.

Problems Linking with Agricultural and Residential Tariffs

  For large scale proliferation of solar projects in India, it is important to involve the agricultural and residential consumers. To understand the impact of the current residential consumption tariff, let us take a look at one such tariff, for an electric utility in Gujarat, namely, MGVCL [6] for the year 2017-18 (see Table 1).

  It can be observed from the table that the energy charges for residential consumers vary considerably as per their monthly consumption: from ` 1.50 per kWh to ` 5.20 per kWh. This is because in India, unlike developed countries, subsidy or concessions are offered to low consumption households, and more so to consumers categorized as ‘Below the Poverty Line’ (BPL).

  Similarly, in the agricultural (AG) sector, we have a highly subsidized tariff regardless of whether the farmer opts for HP based tariff or a metered tariff. (See Table 2).

  As we have stated earlier, it is our firm belief that those interested in generating energy using PV, should be encouraged to do so. In particular, the smaller consumers and poor farmers should not be discriminated with regards to benefits that accrue from solar generation. Only then can we consider the policies to be fair in a democratic regime.

Discrimination under the NM Mechanism

  Under the NM mechanism, only the surplus PV energy generated and exported to the grid is measured by the NM meter and hence purchased by the Distribution Company (DisCom) at a rate that is fixed by ERC. This rate is called the Average (pooled) Power Purchase Cost (APPC) rate, and is based on the levelized cost (LCOE) of solar energy generation. As per the Gujarat Solar Power Policy-2015 and the GERC Order No. 3 of 2015, the APPC rate for the year 2017-18 for kW scale PV power plant is `3.24. This rate is much higher than the subsidized or concessional tariff rates for consumption offered to an AG consumer, say `0.60/ kWh, or to a small residential consumer, say `2.75/ kWh (see Table 1 and Table 2). It is a pity that, under the current subsidized tariff regime, poor AG consumers and small consumers with roof-top solar generation units tend to lose their existing benefits when billed under the NM mechanism.

  On the other hand, the large residential consumers in urban areas tend to gain since they can offset their own more expensive consumption units (exceeding 250 units costing a higher rate of ` 5.20 per kWh) with solar PV generation. In the process, they would also be consuming or drawing less energy from the grid, thereby, falling into the smaller consumption slabs that attract a lower tariff rate (slabs actually intended for small and marginal consumers). Large consumers thus, avail dual benefits under the NM mechanism which we consider to be unfair.

  In spite of the simplicity of NM mechanism (single meter; no license requirement) making it ideal for a democratic country such as India, the disparity between APPC rate and subsidized AG and RGP tariffs is powerful enough to reject this mechanism.

Tamper Issues with NM Mechanism

  Since the NM mechanism has a single bidirectional energy meter, it is not possible to measure the PV generation that is self-consumed. Only the surplus PV energy generated and exported to the grid is measured by the NM meter. The electric utility is, therefore, unaware about the total PV generation, nor the total number of units drawn by the consumer’s own load. This increases the scope for pilferage and misuse of utility’s energy considerably.

  Earlier, the flow of energy used to be always unidirectional (from utility to consumers) and downstream (down from the utility feeder meter to the distribution transformer meters and then to the consumer meters). For the first time in the Indian scenario, this pattern has been altered. Under the distributed generation regime, reverse flow of energy can be expected in any or all sections of the utility feeder. The current system of working out a bi-monthly energy audit no longer suffices or serves the purpose of detecting pilferage of energy.

  The problem gets compounded due to the inclusion of a common APPC rate tariff across consumers belonging to different categories that are otherwise drawing and consuming power against a wide range of tariff rates. Back-feed or back-injection of utility’s own power (drawn by a consumer that enjoys a high subsidy), back into the grid (claiming it to be solar generation that fetches APPC rate), is a form of energy misuse that is fast becoming popular in the residential segment.

Catalysts to boost PV Proliferation in India

  In this section, we offer suggestions that would bring fairness into the compensation mechanism, minimize the scope for energy pilferage and help make the distribution system resilient and fault tolerant.

Achieving Fairness with an FiT Mechanism

  Unlike an NM policy, an FiT tariff can be designed in a fair manner. This is because to implement FiT we have two meters from which it is possible to take four readings, namely:

g: Energy generated by the solar grid tie inverter (exported) and recorded by the FiT meter
s: Energy consumed by the solar grid tie inverter (imported) and recorded by the FiT meter
x: Energy drawn by consumer (imported) from utility grid as recorded by the Standard meter
y: Net Energy (exported) to the utility grid as recorded by the Standard meter

  For all practical purposes, we may neglect the energy consumed by the solar inverter, namely, s. Even if s is significantly high, it would not make too much difference as this consumption gets accounted in the Standard consumer meter reading, x. This strategy would help reduce the number of meter readings per consumer from four to three and also reduce the cost of the FiT meter which can now be unidirectional.

Part of solar generation consumed by the consumer = (g – y)
Total energy consumed by the consumer = (g – y) + x.

  For the total energy consumed, namely (g – y) + x, the same tariff as given in Table 1 is still applicable and requires no change. The only difference in the billing process, in the case of a consumer with roof-top solar generation, would be felt by the meter reader who would now need to extract three readings from two meters instead of a single one. But, in the era of smart metering, with automatic meter reading infrastructure, this cannot be viewed as a major disadvantage.

  The FiT achieves fairness in the compensation mechanism by giving the ability to disassociate the consumer’s own consumption from the solar generation. Accounting is done in two stages:

  For Consumption: The (g – y) + x formula supported under the FiT mechanism ensures that every consumer is entitled to the concessional tariff rate that is applicable to him depending on his category and consumption slab, regardless of whether he has roof top solar or not. There is no discrimination, to a consumer who is also a generator, in terms of his consumption bills.

  For Generation: The DisCom would pay the consumer for the total number of units generated by the solar PV, namely g, recorded on the FiT meter, as per the APPC rate fixed by the ERC for that year regardless of whether these units are self-consumed or not.
The disassociation of generation from consumption under the FiT mechanism is summarized in Table 3. Thus, the above tariff scheme ensures a deterministic payback period that is independent of the consumer category and the consumption slab which was not the case under NM. Hence, the implementation of the FiT policy would bring in a fair regime that will promote solar PV in the high volume, small consumption categories.

Bi-directional Smart Meters

  To support the FiT tariff, we propose use of Smart Bi-directional Meters as a Standard meter (see Figure 6), and a Smart Uni-directional Meter as an FiT meter. This will ensure that the utility would be able to monitor not only the units drawn by the consumer from the utility grid (x), but also the units generated by his solar grid tie inverter (GTI) (g), and the net energy exported to the utility grid (y). The Smart nature of these bi-directional meters would enable a real time audit mechanism that would prove to be the only fool proof one to detect pilferage and misuse of energy.

Figure 6: Energy recorded by FiT and standard meters

Real Time Energy Audit Mechanism using AMI

  Though Smart Grids and AMI holds tremendous potential, the feature that we plan to focus on and exploit in the case of a distribution system with DERs is that which enables us to carry out real time energy audit as a fool proof technique to detect and eliminate tamper / pilferage / misuse / back-feed or back injection of energy.

  Figure 7 shows the block diagram of the smart metering system to be implemented on an AG 11 kV feeder. Smart Meters 1 to N are the bi-directional consumer meters installed at each of the N farmer installations. Smart Meter cum Breaker M is the main meter (also bi-directional) and associated circuit breaker that is located at the Utility Feed Point typically a 66 to 11 kV sub-station.

Figure 7: Block Diagram showing the Real Time Communication Paths between Smart Meters

  The Main meter M is able to communicate with each of the individual consumer meters using GSM (Global Systems for Mobile Communication – the standard bearer of the 2G technologies) or its upgrade – GPRS (General Packet Radio Service) technologies. Remote monitor R is yet another communication node that can remotely monitor the system operation and behaviour.

  The main meter M would use the standardized text communication protocol such as Short Message Service (SMS) that is common in mobile telephony systems, to exchange metering information in the form of short text messages. The meters would be set to communicate automatically in real time every half an hour (48 times a day). The interval can be changed to 1 hour or 15 minutes by sending SMS 24 or 96 times a day, respectively, as per the need. The main meter is in a position to obtain the energy exported / imported by each of the consumer meters over the half an hour interval, add them up and tally them with its own reading. On the event of any mismatch, the main meter is in a position to trip a circuit breaker that will prevent further export of energy till the cause of mismatch is resolved.

Implementation Details

  The functional blocks of a Smart Meter located at each of the smart nodes (metering points) is shown in Figure 8. The energy meter would respond to commands sent by the master controller through the optical port using the standard MODBUS or DLMS protocol. After processing the information so extracted, the master controller will direct the slave controller to accordingly communicate with the other meters or AMI infrastructure using GSM/GPRS communication interface.

Figure 8: Functional Blocks of a Smart Meter

  The Master meter would gather the information thus obtained from each of the consumer meters. The Master controller in the Master meter would have an added responsibility to take action such as to trip the circuit breaker whenever the real time audit process fails or tamper / pilferage gets detected in any section of the distribution grid.

Anti-Pilferage Features

  The smart distribution grid would be able to detect any of the following modes of tamper/ pilferage / misuse / back-feed that involves the grid.

  Tapping of the smart distribution grid’s Aerial Bunched Conductors (ABC) at any point, to either extract or inject power.

  Tamper of the metering infrastructure that includes meters, communication and control network and circuit breakers  

  Back feed of power from the utility’s own distribution grid, back into the utility’s grid, while claiming it to be consumer’s own generation.

  Yet another strong initiative that we recommend to control energy pilferage is that of Electric Co-operatives. We describe it in the section below.

The Co-operative Model

  Co-operatives are conceptually private, independent businesses that are owned by the local consumers they serve. These co-operatives are not-for-profit businesses. An electric-co-operative serves primarily the classes that are often less attractive to the mega-sized electric companies and power marketers, particularly, the agricultural, residential and small commercial consumers.

  Under a co-operative model, anyone who chooses to participate and follow the principles described in this paragraph is entitled to be a member. Co-operatives work to bring others into the business rather than find excuses to exclude. Everyone who belongs to the co-operative has a say in how the business is run. The members elect the directors of the cooperatives to represent their interests. The members provide the economic capital for the business and thereby, share in the risks and benefits of the business (excess revenue is returned to the members). Co-operatives are not government owned but private, autonomous, independent businesses (wholly owned by the people they serve). Co-operatives provide training and education to their staff and elected leaders so that they understand the unique nature of the co-operative business model and acquire the competence to make sound business decisions. Co-operatives are relatively small entities. Therefore, to acquire strength, and to bring greater resources to all members, the co-operatives have to co-operate amongst each other. The main concern of a co-operative is for the community it serves. Its aim is to make its community a better place to live and work in.

The Seven Guiding Principles

  NRECA has formalized the framework of a co-operative model into seven guiding principles. These principles make a cooperative model a special one as they reflect the best interests of all the members. The seven guiding principles are given below:

1. Voluntary and Open Membership

  Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2. Democratic Member Control

  Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. The elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.

3. Members’ Economic Participation

  Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4. Autonomy and Independence

  Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5. Education, Training, and Information

  Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly, young people and opinion leaders, about the nature and benefits of cooperation.

6. Cooperation Among Cooperatives

  Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

7. Concern for Community

  While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

The Consumer Bill of Rights

  The Electric Energy Consumer Bill of Rights that was approved by the membership of NRECA at its 57th Annual Meeting in March 1999.

1. The right to have access to reliable, affordable and safe electric power.

Consumers have a right to expect uniform standards of electric power across the country as they travel or move. They should have a right to choose among various choices. All energy providers should have the obligation to provide reliable, affordable and safe electric power. The obligation of lawmakers is to recognize the differences among electric utilities and to treat them differently in legislation.

2. The right to join together to establish and operate a consumer-owned not-for-profit electric utility.

In a deregulated environment, utility systems may become huge combines remote from local consumers, and where energy providers are free to choose the customer class that provides them the most profit. In such a scenario, consumers must have a way to protect themselves. All electric consumers must have the right to join together to establish and operate a consumer-owned electric system to provide themselves with electricity according to their own needs.

3. The right of consumer-owned not-for-profit systems to be treated fairly and recognized as a unique form of business.

The co-op difference resides in consumer ownership and control. Thus, for co-ops to be treated fairly by government regulation, they must be recognized as a unique form of business, different from investor-owned or community-owned systems.

4. The right to elect representatives to manage their consumer-owned form of business to best meet their needs.

5. The individual right to privacy that assures information about consumers will not be released without their prior express consent.

Consumers should have the right to determine how information collected about them is used. Consumer-owned cooperatives should not be required to collect or to divulge consumer specific information.

6. The right to determine the scope of energy services to be furnished through their consumer-owned not-for-profit utilities.

7. The right to use consumer-owned not-for-profit utilities to provide additional services that meet the needs of their consumers and communities.

Consumers must retain the right to use their cooperative as a means to meet their needs and expectations over time.

8. The right to work in cooperation with other consumer-owned entities with common goals. 
Consumer-owned cooperatives should be able to work together to provide a countervailing balance of power in the marketplace to the huge investor-owned combines that are likely to result from deregulation.

  By comparing the consumers bill of rights with the seven guiding principles of the electric co-operatives (see Section 4), it becomes clear why co-operatives can protect the individual and economic interests of all consumers it serves.

How Can Cooperatives Curb Pilferage?

  The consumer bill of rights given above shows why electric co-operative is the only model which can best meet the needs of a consumer. This means that under the new model, consumer would be content and does not feel cheated. He feels responsible for his co-operative which he owns and will, therefore, hesitate in tampering the meter or the distribution cables to pilfer energy. Even if a consumer decides to tamper, his neighbours who are also members of the co-operative will remain vigilant and prevent such cases from occurring.

  As any improvement of efficiency will directly reflect as lower electricity bills to themselves, the consumers will take all the desired steps to achieve such an improvement. Thus, a co-operative model will not only help in lowering the non-technical losses (tamper will be a rare occurrence), but also in the improvement of PF and thereby, reduction in technical losses. It is also in the interest of the cooperatives to acquire the expertise to provide value-added energy services needed by their members.

  Cooperatives bring in the local control concept that helps to keep a close watch and control on the consumption of the energy by its members (consumers). Proper accounting helps identify those segments of consumers which are entitled to subsidies. In this manner, not only will the subsidies reach the more deserving segment of consumers, but also, the wasteful consumption by the consumers availing subsidy can be curbed.

  During natural calamities such as storms or floods, too, the local co-operatives can help restore the service in a shorter timeframe unlike big investor owned power companies which are generally seen to cut back on its maintenance staff to remain competitive.

Conclusions

  We believe that a fool-proof revenue protection solution should embrace a combination of methods. The use of bi-directional smart meters coupled with analytics services provides the missing piece of the puzzle: a system-level real-time energy pilferage detection capability that can be acted on with confidence. In short, actionable intelligence. With this, we are now able to achieve AMI network’s primary function, namely to make the entire electricity consumption accountable!

  The second method we have proposed is to restructure the distribution system into 11 kV feeder level co-operatives – an entity that is characterized by consumer ownership coupled with local control. This makes a co-operative a very successful and stable business model. The electric co-operatives in the US have not only been self-reliant but have also withstood the changing environment including de-regulation. The third instrument for protecting revenue and making the tariff regime fair with solar generation is to introduce the FiT compensation mechanism instead of NM.


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