Net metering: Balancing the scales—IV

As we concluded in the previous part of this essay, renegotiating the power purchase agreements is difficult, if not entirely impossible. The next possible solution is to change the net metering mechanism into the gross metering arrangement to cope with the rising electricity billing gap between solar and non-solar customers.

Like other shelf solutions, this also appears to be a straightforward fix: switch billing methods, and the problem is solved. However, like with most things in life, this solution is also not so simple.

Gross metering is more than just modifying the billing system; it is about balancing the grid’s needs, maintaining fairness, and supporting renewable energy without burdening anyone. Before we jump to conclusions and declare it the ideal way out, we must first define gross metering, understand how it works, and weigh the benefits and drawbacks of this system.

Net metering: Balancing the scales—III

So, what exactly constitutes gross metering? It is very different from the net metering arrangement that most solar consumers are familiar with.

Net metering allows the distributed generators to balance their electricity bills by exporting electricity generated throughout the day and receiving a credit for it. This credit is at the same rate as the electricity they consume later from the grid, except for peak hours. It’s almost like the grid is acting as a free battery for them, storing their electricity and giving it back when needed.

In contrast, gross metering does not offer this luxury. Instead, all the electricity distributed generators produce is sold to the grid at a fixed feed-in tariff, and they buy back the electricity they need at the standard retail rate. There is no offsetting or “banking” of electricity.

It is more of a clean-cut system where distributed generators are treated like independent power producers who sell all the electricity they generate at one rate and pay separately for the electricity they consume at a second rate. Their total billed amount is the difference between the two amounts.

Let us continue the example we used in the first part of this essay. In a neighbourhood of 550 households, 50 affluent consumers have invested in solar systems on their rooftops and got approval for distributed generation under net metering regulations. Under the net metering system, these 50 distributed generators produce electricity during the daytime and receive a one-for-one credit on their bills.

So, if a household generates 400 kWh and consumes 600 kWh monthly, they pay for the net 200 kWh of power consumption. All other charges, including GST, electricity duty, FAC, QAC and taxes, are applied to net units consumed.

However, the scenario will alter if the government implements a gross metering mechanism. Now, the solar user would sell all 400 kWh to the grid for a feed-in price determined by NEPRA (say PKR 15 per kWh). They would then purchase the required electricity (600 kWh) at the usual retail cost (say PKR 24.88 per kWh).

Net metering: Balancing the scales—II

As a result, they make PKR 6,000 by selling their electricity to the grid while paying PKR 14,928 for the electricity they consume. It means that their net cost would be PKR 8,928, a significant difference from the reduced bill they received under net metering. The additional charges shall be applicable on gross consumption of PKR 14,928.

Gross metering is a global practice that countries like Australia and Germany use to compensate distributed generators for their electricity production and contribute to grid maintenance. Regulatory organisations set feed-in tariffs and monitor compliance to prevent abuse. Governments provide incentives and transitional help to mitigate the impact on distributed generators, ensuring they do not feel abandoned or financially burdened.

But how would solar consumers respond if the government transitions from net to gross metering? We anticipate a significant initial pushback from existing solar customers. After all, they invested in solar systems, expecting to save significantly on their electricity costs thanks to the net metering scheme.

With gross metering, people would believe that the rules of the game have been changed unfairly, putting them at a financial disadvantage. The initial reaction will likely be anger and irritation as they abruptly lose the monetary benefits that inspired their commitment. It is not difficult to envisage protests or petitions against the government’s decision to convert to gross metering.

However, as the dust settles, many solar consumers are expected to seek methods to circumvent the system. Some may use battery storage devices to store excess electricity rather than selling it at the reduced feed-in tariff. Others may use hybrid inverters to switch between solar and grid electricity more efficiently. They may also opt to increase the capacity of their solar systems to achieve net zero balance with the grid.

Net metering: Balancing the scales—I

Solar consumers will seek all strategies to restore control of their energy consumption while avoiding paying the full retail price for grid electricity. Battery storage systems, maximising daytime power use, boosting solar panel capacity, and building hybrid systems are practical solutions that consumers may use to avoid the drawbacks of gross metering.

But here is the question: Will this transition benefit the grid once distributed generators are pushed towards gross metering, and they counter it with loopholes in the system (as discussed above)? The solution is complex. On the one hand, installing battery storage allows solar users to become more self-sufficient, potentially reducing demand on the grid during peak hours.

On the other hand, they are not feeding as much electricity back into the grid, potentially reducing overall renewable energy contributions to the national grid.

The whole point of converting to gross metering is to balance the grid’s expenses fairly, but if solar users move off-grid with batteries, the result may be the opposite. The grid would still have to rely on conventional power sources to supply demand, particularly during peak hours when solar power is unavailable.

Another concern with an abrupt transition to gross metering is that it may inhibit future investment in solar energy. Many people considering installing solar panels may reconsider if they learn they will not benefit financially from net metering. It might impede the rate of solar adoption, leaving the country more reliant on traditional power facilities, which are both expensive and environmentally destructive. If solar investment slows, the long-term aim of lowering electricity rates through renewable energy may fall more out of reach.

So, while gross metering may address the current issue of unjust billing, it may cause further problems.

The history of reforms in the power sector provides us with an important lesson: when we tackle long-term problems with abrupt short-term measures, it does not end well in the long term. It is mandatory to carefully analyse the repercussions of any policy change before implementing it as a short-term breather.

By now, we have discussed the two most argued solutions and found none is quite ideal in the current situation. In the next and last part of this essay, we shall investigate some workable long-term solutions that can create a win-win situation for all stakeholders. Stay tuned!

(To be continued)

Copyright Business Recorder, 2024