Solarization, as measured by the mount of net metering, is soaring. It has gone up from 633 MW in 2021-2 to 2498MW in 2023-24, or 294 percent in just two years, which is an annualised 71 percent. The number of consumers has gone from 75,724 in the year ending 30 June 2023, to 157,844, with 1188 MW added in this period. All of that activity is not motivated by concern for the environment, but is fuelled by economic considerations. The Energy Ministry finds that consumers want to avoid the high tariff the distribution companies are charging. Tariffs are high because they include capacity charges, which have been given so that investors can recoup their investment in the generation capacity they provide. It should be noted that consumers who solarize also have to make an investment, and must depend on the difference between the compensation rate and the tariff to help cover that investment. Apart from the capacity charges, the DISCOs are also finding that their dilapidated transmission systems are facing strains. The problem is that the distribution system has to collect all the units generated, and distribute units to the consumer. One of the hidden problems, which cannot be easily measured, is the amount of solar power off the grid. The problem with all government plans is that they fly in the face of basic economics, and attempts to make consumers pay for the capacity charges will drive the tariffs high, and force the consumer to go off-grid. Once technical obstacles to power storage are overcome, there will be an incentive provided by the government itself, by using electricity bills to charge taxes. An apposite example is that of the rate to be approved by the government for special economic zones, of Rs 34.47 per unit. Using a compensation rate of Rs 11 (which is presently Rs 21) as a benchmark, the incentive to solarize is going to be there.
Electricity is no longer a monopoly, which means the monopolist, in this case the state, must be ready to be pulled down a peg or two. The DISCOs must prepare themselves for a new age of renewables, with solar power probably the main component. If they do not, they will be swept aside. That might happen even if they try to adopt, but it is their only chance of survival.
