Case Study for a Factory

Let’s say, your factory consumes 100 units every day between the peak hours of 10 AM to 11AM (1 hour period). Your solar system too produces 100 units during this same period. Assume that, based on your investment, the cost of generating 1 unit of solar energy from your solar plant is Rs 3/unit (called Levelized Cost of Energy – LCoE) over 25 years. Now, the DISCOM is ready to pay you Rs 4/unit for export of energy as per PPA for 25 years. From your electricity bills, you calculate that you are paying Rs 9/unit to DISCOM on an average.

Gross-Metering

Under gross-metering, 100 units of solar energy is exported to DISCOM which is recorded by the solar export meter for which you would be paid Rs 400 (Rs 4/unit x 100 units) by DISCOM. Now, during the same 1 hour period, your factory would also be consuming 100 units from DISCOM @ Rs 9/unit and hence you would have to shell out Rs 900 (Rs 9/unit x 100 units). In essence, you would end up paying the DISCOM Rs 500 (900 – 400) which translates to Rs 5/unit. If solar had not been installed, you would have paid Rs 900 for this 1 hour period. So there is an overall saving of Rs 400.

Effectively, your factory is consuming energy at Rs 8/unit due to solar (*see calculation below) rather than at Rs 9/unit (from DISCOM) under gross-metering scheme which is an effective saving of Rs 1/unit.

*Effective cost of consumption = Payment to DISCOM + Cost of generating solar energy = Rs 5/unit + Rs 3/unit = Rs 8/unit

Production
@
Rs.3/unit 
(LCoE)
Export
@
Rs.4/unit
Import
@
Rs.9/unit
Payment
to
DISCOM
Savings
(Before Solar 
– After Solar)
Net cost of 
consumption
(DISCOM payment 
+ LCoE)
Effective 
Saving
100
100
100
(4x100) - (9x100) 
= -Rs.500

(translates to Rs 5/unit)

900 – 500 = 400
Rs 8/unit
Rs 1/unit

Net-Metering

Under net-metering, the solar energy is consumed by your factory first and whatever is excess would be exported. In this case, since 100 units is the demand from the factory during the 1 hour period, all 100 units generated by solar would be consumed in the factory itself and there would be no export. If solar had not been installed, you would have paid Rs 900 for this 1 hour period (Rs 9/unit x 100 units). So there is an immediate saving of Rs 900.

Effectively, your factory is consuming energy at Rs 3/unit (directly from solar) rather than at Rs 9/unit (from DISCOM) under net-metering scheme which is an effective saving of Rs 6/unit.

Production
@
Rs.3/unit 
(LCoE)
Export
@
Rs.4/unit
Import
@
Rs.9/unit
Payment
to
DISCOM
Savings
(Before Solar 
– After Solar)
Net cost of consumption
(DISCOM payment 
+ 
LCoE)
Effective
Saving
100000900 – 0 = Rs.900Rs 3/unitRs 6/unit

Analysis

From the above, it is quite clear that Net-metering makes a lot of sense for factory owners looking for captive consumption. Since you have invested and are generating solar energy that is cheaper, it would be prudent to allow you to consume that cheaper form of energy under net-metering scheme. This would also allow you to have a lower payback period for your investment.

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