Will Net Metering Model for Residential Rooftop Solar PV Projects Work in Delhi? – A Financial Analysis

Abstract

In order to promote solar energy generation in Delhi, Delhi Electricity Regulatory Commission (DERC) has issued regulations for ‘net metering’ based Solar Photo Voltaic (SPV) rooftop projects. The paper aims to examine the financial viability of the notified scheme for residential consumers based on the current costs and applicable electricity tariff in Delhi, India. The self-owned and the third party owned models are evaluated for different SPV system sizes which are suitable for installation on residential rooftop spaces. The paper compares the Internal Rate of Return (IRR) based on cash flows for different cases using a deterministic financial model. Results indicate that with the current costs, smaller systems (2.5 and 5 kWp) are suitable for self ownership, but require the existing 30% subsidy in order to be financially viable. However, the return on larger self-owned systems (10 kWp and above) is sufficiently high and does not warrant the subsidy. On the other hand, third party ownership is commercially not feasible for smaller systems, while returns on larger systems are sufficiently high. The paper while analyzing the IRR for various cases concludes that there are certain drawbacks in the scheme as it does not allow optimal utilization of rooftops for generation of electricity. These limitations if relaxed, can improve the financial viability for various models and can encourage decentralized generation of electricity in Delhi.