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Empowering Solar Growth: Analysing the Regulatory Dynamics of Net Metering and Feed-in Tariffs in India

By - King Stubb & Kasiva on September 9, 2023


In the domain of renewable energy, the adoption of solar energy has emerged as a ray of hope for a sustainable future. As our focus on leveraging solar energy increases, rooftop solar installations continue to increase in popularity. Nonetheless, in order to prime solar energy as our primary source of power presents several obstacles, including the intermittent nature of sunlight and the disparity between energy production and consumption patterns.

This is where the notion of net metering comes into play. It provides a solution that addresses these challenges and functions as a catalyst for the substantial growth of solar energy, especially in a country like India. Net metering is a dynamic system for monitoring and documenting the flow of electricity between individual solar energy installations and the national grid. It provides several economic incentives and also plays a crucial role in reducing greenhouse gas emissions and improving grid reliability. It further allows homeowners and businesses to maximize the potential of their rooftop solar installations.

This article aims to highlight the workings of net metering, the regulatory intricacies, and how they aid in the growth of solar energy in the following manner:

  • Net Metering and Solar Energy
  • Virtual Net Metering
  • Regulatory Framework in India
  • Challenges and Future Prospects

Net Metering and Solar Energy

Net metering is a system that compensates solar energy generators for what they contribute to the grid. When solar panels produce excess electricity, this excess power is effortlessly integrated into the grid, allowing solar energy producers to effectively sell their surplus capacity. This excess energy can be reclaimed when solar production is insufficient, such as at night or on cloudy days. The bi-directional electricity meter, a device that creatively runs backward when excess solar energy is sent to the grid, is the heart of this system. Customers are only billed for the ‘net’ energy they consume, streamlining invoicing while promoting the cost-effectiveness of solar energy.

Solar power systems are connected to the utility grid through the customer’s primary service panel and meter. This configuration guarantees the efficient flow of surplus electricity into the grid when solar panels generate more energy than is required on-site. Importantly, because the bi-directional meter measures power in both directions, it calculates the ‘net’ energy consumption, taking into consideration both power purchased from the grid and power returned to it. This innovative method eliminates the need for expensive energy storage solutions such as batteries, thereby making solar energy more affordable and environmentally favourable.

Benefits of Net Metering

  • Cost-Saving for Consumers: Net metering enables solar energy system owners to produce excess electricity during daylight hours, thereby reducing their dependence on the grid and lowering their electricity bills. These cost savings can be invested somewhere else.
  • Grid Optimisation: Net metering assists in balancing grid demand by lowering peak load demand throughout the day, resulting in fewer instances of load reduction. It also helps reduce technical and commercial transportation losses for state Distribution Companies (DISCOMS).
  • Eliminate Battery Costs: With the grid functioning as a vast energy depository, costly battery storage systems are unnecessary. This reduces the cost of solar installations, as only a tiny battery backup is needed for power outages.
  • Minimal Maintenance: Solar panels and inverters utilized in net metering systems have only a few moving elements, resulting in low maintenance requirements. Panels typically include lengthy warranties, and the absence of moving parts lowers the likelihood of failure.
  • Environmental Benefits: By decreasing the demand for electricity from conventional sources, net metering contributes to a sustainable planet. It aids in the reduction of greenhouse gas emissions and promotes environmental preservation by promoting clean, renewable energy sources.

Virtual Net Metering

Virtual Net Metering (VNM) provides innovative solutions for addressing space restrictions in rooftop solar adoption. It allows consumers to install solar panels away from their energy consumption points, thereby establishing a community solar invoicing system. Net metering credits are distributed to subscribers, which significantly reduces electricity bills.

India recognizes the potential of VNM for simplifying rooftop solar deployment[1], drawing inspiration from the United States. Policymakers believe that VNM can assist in efficiently achieving renewable energy goals. Regulators can utilize VNM to reduce cross-subsidy charges between consumer categories, thereby facilitating dynamic tariff structures. Reducing peak loads benefits utilities, particularly in congested distribution zones, thereby enhancing grid resilience. VNM enables consumers, including those with restricted rooftop space, to invest in green energy.

Regulatory Framework in India

To encourage the integration of solar energy, India’s net metering regulatory framework has grown substantially. The Electricity (Rights of Consumers) Amendment Rules, 2021[2], define net metering and introduce terms such as “gross-metering” and “net-billing or net feed-in.” State commissions have the authority to establish rules for these mechanisms, with the central commission allowing net metering for loads up to 500 kW or the sanctioned load in the absence of state rules. The framework encourages time-of-day tariffs to increase energy storage and peak-hour grid participation.

Net metering is available to prosumers with loads up to 500 kW or their sanctioned capacity, while gross metering is an option for larger systems. For precise measurement and potential renewable energy purchase obligation (RPO) credits, DISCOMs may install solar energy meters. This regulatory framework ensures equitable compensation and billing practices for prosumers, under the Electricity (Rights of Consumers) Rules, 2020[3], which emphasize consumer rights and efficiency of service in the electricity sphere. The Ministry of New & Renewable Energy has also introduced a performance-based incentive scheme for Rooftop Solar Power Plants.[4]

Challenges and the Way Forward

While rooftop solar adoption is increasing in India, net metering implementation faces significant challenges. The intermittent nature of solar power generation leads to significant voltage fluctuations that often exceed established limits. These fluctuations can place a strain on the power transmission system and even compromise its security. In addition, the presence of non-linear components in solar systems creates electrical disturbances, which interfere with equipment, telephone circuits, and metering accuracy. Transferring undesired DC into an AC-driven grid may lead to power loss and transformer overheating.

The implementation of net metering policies in states also faces significant obstacles. For example, the exclusion of high-tension consumers from net metering in Tamil Nadu impedes widespread adoption. Additionally, the absence of published forms and established procedures for net metering implementation in Maharashtra has hindered its effective implementation. These instances highlight the crucial need for consistent, favorable, and well-defined state net metering policies.

To realize the maximum potential of net metering in India, these obstacles must be resolved. This requires implementing stringent voltage regulation, assuring compliance with harmonics standards, and taking precautions against unintended islanding. Managing reverse power transfer in grids with a high penetration of photovoltaics is also crucial.


Net metering is a promising way to harness solar energy in India, per the country’s renewable energy objectives. While substantial progress has been made in the regulatory framework, challenges like voltage fluctuations, electrical disturbances, and inconsistent policies continue to remain. Addressing these challenges, along with optimizing interconnection processes and ensuring uniform policy interpretation, will be crucial to unlock the full potential of solar net metering in India.

Frequently Asked Questions (FAQs)

What is the net metering capacity limit in India?

The net metering capacity limit in India differs by state, but typically ranges up to 500 kilowatts (kW) or the sanctioned load, whichever is lower.

How does net metering handle voltage fluctuations?

In net metering systems, voltage fluctuations caused are regulated by inverters. If fluctuations exceed specified thresholds, the system disconnects from the grid automatically to maintain stability.

What is Virtual Net Metering (VNM)?

VNM is a billing mechanism that enables electricity consumers to receive credits for solar energy generated at a location other than where it is consumed, typically via shared solar facilities. These credits can mitigate their monthly electricity costs, thereby encouraging community solar adoption.





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