Quantifying Rooftop Solar Benefits: a State-Level Value of Solar Analysis for India

Individual states have designed solar policies and compensation mechanisms to help achieve specific targets established for each state. As costs decline and these systems are more widely adopted, policymakers, regulators, and other stakeholders may want to better understand the net costs and benefits of rooftop solar to adopting and nonadopting customers, the grid, distribution companies, and other power system stakeholders. Indian utilities generally perceive rooftop solar systems as impacting their revenues, as consumers begin meeting on-site load with rooftop generation. This is particularly pronounced for customers such as commercial and industrial entities, on whom distribution companies rely to pay higher rates to help subsidize consumption from lower-income and smaller residential customers. Rooftop solar is more attractive for these larger customers as their tariffs are higher and they have more access to capital and financing than smaller customers. As of June 2020, approximately 73% of rooftop solar installed capacity was deployed by commercial and industrial customers. The Central Electricity Regulatory Commission and the Forum of Regulators recently updated the model regulations for rooftop solar systems by allowing net billing and gross-metering at a rate defined by the state regulators. Some states have transitioned from net energy metering to net billing, while others have made efforts to do so. Analyses that quantify the costs and benefits associated with rooftop solar adoption and operation can inform decision makers in the development and evaluation of rooftop solar policies. One such analysis is a value of solar (VOS) study, which quantifies select costs and benefits surrounding rooftop solar based on electricity system and other local data. This report provides a VOS analysis for two states in India: Gujarat and Jharkhand. The methodology considers four benefit categories (Energy, Generating Capacity, Transmission Capacity, and Environmental and Health), two cost categories (Program Administrative Costs and Rooftop Solar Integration Costs), and two scenarios (existing levels of renewable energy capacity and significant capacity additions to meet established renewable energy targets). Between the two states analyzed, there are significant differences in power system sizes and generation mix, renewable energy targets and resource potential, as well as adopted compensation mechanisms. The total VOS is lower in Jharkhand than in Gujarat, owing to the differences in Energy and Generating Capacity values (at existing solar photovoltaic [PV] penetrations). The lower relative Energy and Generating Capacity values in Jharkhand are associated with lower overall electricity generation costs in Jharkhand and poor alignment between rooftop solar generation and system peak demand in Jharkhand. Other key analysis findings include the value of rooftop solar being strongly context-dependent, based on underlying load patterns and generation mixes in the states of Jharkhand and Gujarat. Grid exports from rooftop solar in both states, under both scenarios considered, can help reduce the operating and capital costs associated with running the power system. Under today's renewable energy penetration levels and rooftop solar installed capacity (Base Case), the marginal value of rooftop solar generation is 4.8 rupees per kWh of rooftop solar generation for Gujarat and 2.3 rupees per kWh for Jharkhand. These values are calculated as the combined Energy, Generating Capacity, and Transmission Capacity values at the current rooftop solar installed capacity levels in each state. Under expected renewable energy penetration levels given stated government goals (MNRE Goals), including new rooftop solar capacity installations, the marginal VOS drops to 3.8 rupees per kWh for Gujarat and 2.3 rupees per kWh for Jharkhand.