NET-METERING: Regulatory Avenues of the Solar Supply Chain and Business Models – Part 2

A context of developing net metering regulations in India. The article is a continuation of Part 1 carried in the June issue of the Electrical India magazine.

Net Metering Solar Power Energy Renewable Case Study

Third-party owned Rooftop PV net metering model

In this category of the net-metering model, the developers lease out solar PV systems to interested rooftop parties. This is a well-known model for residential owners in the United States, where turnkey installers lease rooftop systems to individual households who further, in turn, pay them a monthly lease rental. The owner of the house provides the rooftop and commissions with a turnkey installer to design and install the system. Alternatively, the installers can also offer an integrated service of leasing, commissioning and maintaining the systems to homeowners and guaranteeing standards of performance. The electricity generated from such a system is used to meet the rooftop owner’s internal electricity needs while the excess generation is fed into the grid on a net metering basis. The following figure provides a broad level structure of a third party owned net metering model.

This model has the two main benefits, firstly, benefits to rooftop owner and secondly, benefits to developers. The household owner avoids large upfront investment for the solar equipment and on occasion avoids assuming technology or performance risk of solar systems. Net-metering allows the rooftop owner to save on power consumed from the grid to the extent of solar generation. A part of savings in power consumption is shared with the developer by way of lease rental.

Whereas in terms of benefits to developer, the leasing company generates revenues by way of lease rental from the rooftop owner under a contract, as it continues to be the owner of the equipment, it also qualifies for claiming depreciation on the capital cost of the PV systems, with associated direct tax benefits. To make this model operational, electricity regulations need to be designed to remove specific barriers to the participation of developers and intermediaries, who play an important role in the propagation of such systems. Under prevailing regulations in the Indian context, a third-party-owned system, unless specifically addressed, may result in an open access transaction, with implications of wheeling charges and surcharge relating to cross-subsidy.

Business Model Third Party Owned Rooftop Pv Net Metering
Figure 2: Business model II: Third party owned Rooftop PV net metering

Challenges concerning regulation

Based on the above, it can be said that Energy Accounting and Commercial arrangements, Interconnection arrangements, Regulatory Instruments and Metering schemes are identified as determining parameters for coverage in the model regulations. A comparative review of the implementation of net-metered models in other countries like the United States, Japan and Germany and the current level of regulations existing in various states in India indicate that there are certain critical issues about the energy accounting and commercial settlement process, requirements of the interconnection arrangements, the applicability of the current regulatory instruments like RECs on the net-metered projects and metering schemes options need to be addressed to implement net-metered based systems in India. These issues are now being addressed through the accompanying net metering regulations so that implementation can be streamlined across various states. Applicable metering code and standards also need to be defined for the net-metered connections.

Advantages of Net Metering

There are many advantages of net metering. It promotes clean energy production and reduced carbon footprint because it reduces dependence on conventional energy sources. It motivates consumers to adopt solar PVs and also promotes investment in this field.

Low cost, easily administered method of encouraging customer investment in renewable energy technologies.

It increases the value of electricity produced by renewable generation and allows customers to “bank” their energy and use it at when necessary, thus giving customers more flexibility.

Net metering is a necessary policy to boost the growth of renewable energy.

Giving customers control over their electricity bills – Net metering allows utility customers to generate their electricity cleanly and efficiently. During the day, most solar customers produce more electricity than they consume; net metering allows them to export that power to the grid and reduce their future electric bills.

Net metering provides substantial economic benefits in terms of jobs, income and investment in the renewable energy sector.

Protecting the Electric Grid – By encouraging generation near the point of consumption, net metering also reduces the strain on distribution systems and prevents losses in long-distance electricity transmission and distribution.

Net-Metering: Case of Maharashtra

Recently, the Maharashtra Electricity Regulatory Commission (MERC) has come up with new regulations for net metering in the state. The proposed regulations apply to net metering and net billing arrangements (gross metering), and grid-connected renewable energy generating systems (REGS) tied to the consumer’s meter. According to the new regulations, the net-metering arrangement is permitted by the distribution licensee on a non-discriminatory, ‘first come, first serve’ basis to eligible consumers who have already installed or are likely to install a renewable energy generating system connected to the network of the DISCOM. There is a meter connection gap to a distribution transformer of the DISCOM that should not exceed 70% of its rated capacity.

MERC’s regulations enforce the minimum size of the system as 1kW, should not exceed the sanctioned load (in kW) given to consumers, contracted demand, the cumulative capacity of the transformer and distribution licensee to be very active and participatory on making available net metering arrangements every quarter. However, these will not apply to those consumers with pending arrears with the distribution licensee and there are some relaxations on high tension (HT) consumers who can install and connect the renewable systems at their low tension (LT) bus bar systems. Consumers can install a renewable energy generating system with or without storage the inverter will have the appropriate arrangement to prevent the power from flowing into the grid in the absence of grid supply. As the most important compliance, the energy purchased by the DISCOM from these rooftop systems will qualify for its renewable purchase obligation (RPO).


It is seen that net-metering is a potential tool to drive power generation through renewable technologies, and it not only encourages the consumers to generate power for their own needs but also pays them for the excess power generated by their solar PV systems. The energy generated by Solar PV cells fulfills the immediate energy needs of the consumer’s requirements and slashes his electricity bill. Any extra power generated is exported back to the electric grid. The net metering would credit the electricity thus exported to the grid. In summary, consumers are bill only for their net energy use.

Vivek Soni
Author: Vivek Soni, Chartered Engineer,  PhD IIT Delhi Faculty, Bharatiya Vidya Bhavan’s Institute of Management New Delhi