The fine-print in the Gujarat Solar Policy

In the energy policy sector, there is an old adage – what Gujarat thinks today, the rest of India thinks tomorrow. Over the past decade, Gujarat Government has pioneered several policy initiatives. Each of these initiatives were then noted and taken up at a national level and scaled up. Gujarat was the pioneer in ground mounted solar plants, offering high tariffs to ensure the plants get viability. Gujarat’s model of agricultural feeder separation is a pan-India policy so far. The list is long.

In this context, when Gujarat comes out with a solar policy, the rest of the country’s policy makers look up with keen interest. Let us see what this policy brings to the table now.

Generally, state solar policies provide for specific and separate policies for the rooftop solar space. However, Gujarat has chosen to take the route of just defining solar plants for customers in only two categories – captive and third party. Let us see what each of these categories means. A captive solar plant is one in which the consumer himself sets up the solar plant and owns it. Third party is when a developer (such as Oakridge) makes an investment in a solar rooftop plant or a third party location. The policy makes no distinction of whether this plant is located on the premises of the customer, or elsewhere. This is a huge problem – read more to find out why.

The big development in the Gujarat Solar policy is the lifting of all capacity caps in the developing solar plants for captive or third party use. In other words, the customer can develop any capacity of solar plant that he requires, subject to the space available. The solar plant can also be set up in different location, and the power can be wheeled through the utility’s requirement. The various elements of the policy are listed here for each category of customer –

  1. Set off of units – The policy provides for set off of solar units to be set off during the generating hours (7 AM to 6 PM). This is good because the customer gets the benefit of solar power generated through solar rooftop systems. This energy set off is the only semblance of net-metering left. And this is where the good news ends. Moving on.
  2. Purchase of surplus power – The surplus generated in this period would be purchased by the Discom at abysmally low prices. In this policy, the price hass been notified as 75% of the price of solar power procured by GUVNL in the preceding 6 month period. At present, this amounts to about Rs. 1.5 / kWH. Imagine setting up a solar power plant and only getting the benefit of surplus units at Rs. 1.5 / kWh. This is a departure from the current regime where net-metering is allowed. i.e., surplus units would get adjusted against the bill of the customer. Hence the customer in the present regime would get benefit at the highest slab of his electricity bill. This policy is consistent for captive solar power plants and third party power plants.
  3. Differential taxation for third party solar plants – solar plants set up by third parties (not the customer) get an additional impediment. Under the Gujarat solar policy, such power would be subject to transmission and wheeling charges, and also cross subsidy charges. This is an additional cost that reduces the viability of solar rooftop power. Let us take a step back and understand why. Solar rooftop systems, which are located on the roof of the same building, are being asked to pay transmission charges to the utility and cross subsidy charges. This makes very little sense because the solar rooftop plant is physically located on the rooftop of the same premises. Why should this plant be paying transmission charges, and more, cross subsidy charges?

In summary, Gujarat solar policy makes it possible for higher solar capacities to be set up by customers. All limitations have been lifted. This has the potential to spur capacity additions in a big way. However, additional impediments have been added by drastically reducing the price at which the surplus power injected would be purchased, and worse, adding transmission costs and cross subsidy charges.

In our view there needs to be a distinct clarification that the transmission charges and cross subsidy charges would not be applicable if the solar rooftop plant is set up on the same premises. If not, this could become a major hurdle to rooftop solar capacity additions in the state of Gujarat.

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