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Interaction | March 2018

Institutionalise generation-based incentives

In an exclusive interview to POWER TODAY, <span style="font-weight: bold;">Sanjeev Aggarwal, Managing Director &amp; CEO, Amplus Energy Solutions</span> emphasises that generation-based incentive needs to be institutionalised to boost the solar rooftop segment. Amplus is also proposing a model to discover the value of rooftop solar power.<br /> <br /> <span style="font-weight: bold;">The government has truncated the target for rooftop solar to 1,000 MW from 5,000 MW for the fiscal year 2017-18. What accounts for the present slowdown in the segment?</span><br /> The target was over-optimistic. The government has seen progress in the last few years and the expectation is that it will be closer to 1 GW. Therefore, I don't think this should come as a big surprise. Having said that, with the new team in place at the Ministry of New and Renewable Energy (MNRE) and the minister 's growing interest in the sector, there will be a recalibration of targets and identification of bottlenecks that need to be overcome. The government is now more knowledgeable about ground- and policy-level challenges, and is trying to address them. Meanwhile, there is no option but to downscale the target till certain issues are fixed.<br /> <br /> <span style="font-weight: bold;">The current policy is said to have been designed with only the industrial rooftop in mind owing to lesser incentives for residential rooftop. How can this be addressed?</span><br /> In the industrial or commercial, the consumer pays a higher tariff. If they install rooftop solar, they get a 20- to 40-per cent reduction in tariff, while in case of domestic rooftop that type of advantage is missing. The second challenge in domestic rooftop is that people will find it difficult to invest even a few lakh rupees in a technology that they barely understand. We suggest the government to move towards generation-based incentives and make it more institutionalised. Give people an institutional mechanism where developers and investors come forward to set-up plants for domestic use just like we do in industrial and commercial rooftop. Rather than giving them subsidy - as that only proves to be counterproductive for it only adds capacity and doesn't bring in generation - provide them fairly attractive tariffs to incentivise investment.<br /> <br /> <span style="font-weight: bold;">How can the policy around net metering be made more cohesive to propagate rooftop solar?</span><br /> There are caps that do not allow net metering beyond a certain limit. Moreover, there are challenges in obtaining permission and setting it up. At the root of the issue is the fact that there is cross-subsidy element that is charged by power distributor companies (discoms). But when a customer exits the grid after installing solar rooftop, that element also goes away.<br /> <br /> <span style="font-weight: bold;">One of the solutions suggested is to allow the prosumers - producers and consumers of electricity - to sell the surplus power generated by them. How valid is that?</span><br /> At what price, that's the question. If you say that my purchase price will be built in tariff of Rs 9 that is too high for the discom to pay. If you say it is average power purchase cost (APPC) of Rs 3 to Rs 3.5, that is too low for the consumer to generate anything. So, what is the actual value of rooftop solar power? Is it Rs 9 or Rs 3 or somewhere in between. To my mind, the value of a solar rooftop is equal to the cost of service to a particular customer. When an electricity distributor buys power, he uses a transmission and distribution network. By the time the power arrives at the customer's doorstep its cost, depending on the voltage level, it is somewhere between Rs 5 to Rs 6. The retail tariff may be Rs 8 or Rs 9. That is the profit margin of the distribution company. So, the solution that we are actually proposing to MNRE is on working out a value for solar. Don't go by the power purchase cost as that is the origination cost. If a customer is generating power at the point where I as a distributor was supplying it to him, and if I have to now take it back from him from that point, that becomes my cost of solar as well as my value of service to him.<br /> <br /> This is a new concept that we are trying to promote and it goes beyond net metering. We have had some preliminary discussions with MNRE and the regulator has to buy it. Once the purchase price from consumers is equal to the value of rooftop solar, it will help everyone. The customers will get a decent price for what they produce and the electricity distribution companies too won't be insecure about their high-paying consumers abandoning them. If the tariff for an industrial customer in Maharashtra is Rs 8 but the cost of service Rs 5.5, the distribution companies will pay only that much and not feel short changed. The customer might feel that while earlier he was saving Rs 8 it is now only Rs 5.5. And it's here that MNRE has to pitch in the form of generation-based incentive (GBI) to cover that gap. It then becomes a win-win situation for everyone. This will also help in deepening the market by making it sustainable in the long-term. Fixes such as net metering etc. are short-term solutions as you are pushing someone who is already making losses into further losses.<br /> <br /> <span style="font-weight: bold;">Government has proposed to set-up $350-million fund under the International Solar Alliance (ISA). To what extent can the move benefit the solar segment?</span><br /> There will be some benefits, particularly for the manufacturing segment. In Africa, communities are underserved as far as grid development is concerned. It is going to be very helpful for our manufacturing companies to find out products that are cost-effective for those markets. That is one. The other is that some of the companies will be going out and assist in setting up networks and selling products that are being developed in India.<br /> <br /> <span style="font-weight: bold;">You recently signed an MoU with Yes Bank to jointly fund solar projects in India. Please throw light on those developments?</span><br /> Given that the renewable energy is in itself a fairly unstable source of generation you have to find out a solution that works with the larger ambition of a cleaner energy future. And that can only come about in the form of storage. We are also working in that area and setting up a few solar plus storage type of projects. In the long run, we hope to establish the commercial viability of these projects.<br /> <br /> <span style="font-weight: bold;">- Manish Pant</span><br />
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