Technical Integration Is the First Priority

Executive Summary

While most of the policy focus in India, as elsewhere, has been on large-scale renewable energy, the Government of India has set a target of 40 gigawatts (GW) of installed rooftop solar (RTS) capacity by 2022 to improve energy security, reduce land use strains, better strengthen the national grid, improve air quality and reduce user costs. The government has also undertaken significant measures to support the adoption of electric vehicles (EVs) and energy efficient lights and fans. State governments are also supporting the uptake of Distributed Energy Resources (DER) including rooftop solar (RTS) and solar irrigation pumps. This report puts the case that the future of RTS is rooftop solar plus storage—either in the form of batteries or electric vehicles.

For all the above reasons and more, the integration of DER is worthy of serious policy attention as an enormous opportunity for India. This report looks at what can be learnt from the integration of DER in Australia so far and how it might better inform India’s investment program. We discuss technical, regulatory and market integration of DER, arguing that technical integration is the first priority. Technical integration work is vital to support consumer and investor confidence in DER in India. This encompasses the quality of DER products and installations, integration into the distribution grid and providing certainty of return on investment.

The Australian Energy Market Operator (AEMO) has established a DER Register which collects information on DER devices such as rooftop solar, batteries, EVs, air conditioners and pool pumps at the time of installation. Australian distribution businesses have been trialling a number of technologies and data sources to give them greater visibility of low voltage (LV) networks. Greater visibility of LV networks, including through smart meters or equivalent devices is important for the efficient and effective management of multi-way flows.

Ensuring up-to-date technical standards are in place for technologies such as inverters, EV charging and appliance demand response is vital. These standards are best set in a way that involves industry, consumers, distribution businesses, Original Equipment Manufacturers (OEMs), the system operator (POSOCO), the Ministry of Power and others. In Australia quality control of solar modules and installations has been regulated via subsidy schemes.Probably the most important innovation in managing DER in Australia has been the development of dynamic operating envelopes (DOEs) which vary import and export limits over time and location, based on the available capacity of the local network or power system as a whole. Indian distribution companies (discoms) could look at developing the capacity to create DOEs, particularly in leading areas of growing RTS penetration.

Installation of Rooftop Solar in India Vis-a-Vis Australia

The recently released IEA India Energy Outlook 2021 concludes that “India is in a unique position to pioneer a new model for low-carbon, inclusive growth”. That report also states that the “Indian electricity sector is on the cusp of a solar‐powered revolution”,2 an ideal opportunity to lead the developing world in decarbonisation.India’s growth in large-scale solar generation over the last five years has been impressive, reaching 39GW at the end of January 2021, equivalent to total wind capacity.3 RTS is only one sixth of the total solar capacity at 5.9GW (as of June 2020). The Government of India has set a target of 40GW of installed rooftop solar capacity by 2022. It is currently unclear if this target will be achieved due to various factors including policy uncertainty, Covid-19 and lack of access to low cost capital.

These figures comparing large- and small-scale renewables would suggest that rooftop solar in India would be of little interest to investors or policy makers. However, this report outlines numerous reasons to better leverage the significant system-wide advantages for India to accelerate the rollout of RTS together with other forms of distributed energy resources (DER), especially small-scale storage,micro-grids and EVs, as well as best leveraging the value of India’s 46GW of hydro- electric capacity.The consequences of these dynamics are that urgent reform is needed to optimise the benefits of DER for all Indian electricity system users. In Australia, the Energy Security Board (for which the lead author worked) has developed a DER Integration Roadmap and Workplan focused around three dimensions: technical, regulatory and market. This may seem simplistic, but it is important to understand that DER integration is complex and the order of actions is important to reduce costs.

Technical Integration of DER

Technical integration of DER is the first step—it lays the foundation for ensuring DER does not impose additional costs and in fact can be used at times to reduce system costs. Technical integration work is also vital to secure consumer and investor confidence in DER. DER creates a critical change in the distribution from one-way to multi-way flows of electricity.

Dynamic Operating Envelopes:Probably the most important innovation in managing DER in distribution networks in Australia has been the development of dynamic operating envelopes (DOEs), sometimes known as dynamic connection agreements, which vary import and export limits over time and location based on the available capacity of the local network or power system as a whole. Previously distribution network businesses have been managing solar exports through the imposition of static export limits (usually 5kW for households), despite the growing size of household PV systems (now averaging 9kW). This blunt instrument, while useful for incentivising self- consumption, limited the return on investment and resulted in inefficient solar spillage, especially on sunny days with households that weren’t at home during the day.

Architecture of SA Power Networks Operating Envelopes and VPP Trial

A partnership of regulatory, industry and academic organisations has been formed to examine how to support national consistency for fair and equitable DOE allocations, standardisation of customer connection agreements, information and market process and monitoring and enforcement. This work is being supported by the Australian Renewable Energy Agency (ARENA).22 It will take some time to complete, but what is most important is to ensure the implementation of DOEs is a positive consumer experience.

Percentage of Indian Households Using Appliances, 2019

After the building fabric, lighting is the next priority for energy efficiency. Australia banned incandescent bulbs in 200926 and halogen bulbs from 2020 in line with EU standards.27 In 2012 under the National Mission for Enhanced Energy Efficiency, the Bureau of Energy Efficiency (BEE) launched perform, achieve and trade (PAT) scheme. The aim was to improve the energy efficiency of large-scale industries and create a market-based mechanism to incentivise energy savings by converting these savings to a tradable instrument. The scheme was a big success, resulting in industries exceeding their energy savings target by ~30% and an emissions reduction target by ~35% during the 2012-2015 period.28 The scheme was extended to other sectors in Phase 2 and has been instrumental in reducing energy consumption and thereby emission in the industries.

The India Cooling Action Plan (ICAP) launched in 2019 adopts the principle of “thermal comfort for all”, with a target to reduce cooling energy requirements by 25‐40% by 2037‐38, but the IEA notes that “the precise nature of this commitment is not clearly defined”.

One area for India to consider therefore is the potential for demand response for air conditioning.The Energex PeakSmart air conditioning program31 in south east Queensland provides households, businesses, builders, developers, retailers and traders with financial incentives of up to $A400 for purchasing and installing a demand- responsive air conditioner or converting an existing air conditioner to being able to be remotely controlled by the discom. Such remote-control programs will become more cost effective as the afternoon-evening peak increases.Similar demand-response measures could also be applied to agricultural pumping in India. Alternatively, these loads could be moved to times with greater availability of supply and network capacity.Co-location of solar with pumps is already underway. For example, in Gujarat, the government introduced the Suryashakti Kisan Yojana (SKY), a pilot project to enable 12,400 farmers in 33 districts of the state to generate solar power—and to use part of that power for irrigation while selling the surplus to the grid for Rs7/kWh (US$0.10) for seven years and Rs3.50/kWh (US$0.05) for the remaining years. Such incentives help farmers to manage their demand and provide the energy during peak hours. The introduction of time-of-day tariffs for agricultural consumers would help farmers provide the much-needed demand response and deliver cost savings to discoms by avoiding buying expensive power.

Time-of-day pricing could incentivise demand response, so that should be a first step. Time-of-day pricing should be a priority where there are lumpy or non- time critical loads (like pumps). This is covered in detail below.The discoms will need to develop significant capacity in demand management and demand response. They do not necessarily need to undertake the works themselves and may benefit from use of competitive tendering for such ‘non- network solutions’.Models like Farmer Enterprise (FE)/village-level enterprise or Private Developer (PD) could be explored. In the FE model, the enterprise is responsible for the implementation of solar irrigation and the distribution of solar pumps among its members. In the PD model, a discom can invite private players to install a solar power plant, which would supply electricity to the discom or a renewable energy buyer.

The Importance of Smart Meters or Equivalent Technology

The Indian government plans to replace 250 million analogue meters with smart meters across India over the next three years.32 There is a great need for better data to better manage distribution networks with higher penetration of DER. However, smart meters are only one of the means to achieve this—and are not necessarily the least-cost option. Therefore the government should consider including as an alternative to smart meters, appliances or devices that offer a cheaper means of recording electricity flow data.Careful consideration must be given to what the data needs are, the organisations that will use the data and for what purposes, and who pays. Australia is still struggling with these issues and the Energy Security Board is developing a Data Strategy to manage changing data needs during the energy transition.

Market Integration of DER

Need for Consistency in ROIs

Australia has been on a ‘solarcoaster’ with solar feed-in tariffs, which is not to be recommended. Solarcoaster is the term coined for the rising and falling of solar installations as subsidies and rates of feed-in tariffs have changed.

In Australia, state government subsidies have varied dramatically over time from highs of a gross A$0.40/kWh (US$0.30/kWh) and net A$0.66/kWh (US$0.50/kWh). The rates are now generally set by retailers, averaging A$0.06-0.12/kWh (US$0.05-0.09/kWh) but there is huge variation in the rates, with the price sometimes being zero. The investment uncertainty has caused difficulties for investors, installers and consumers. It is not recommended that India follow Australia’s example in this regard.For a smoother transition, policy makers should endeavour to keep a relatively steady rate-of-return as installation and financing costs fall and circumstances change. A five-year average payback period would provide a sufficient ROI to encourage households to adopt the technology. The pathway/rationale for tariff changes needs to be clear; for example, so that developers know that the changes will keep the payback period at or below five years as module costs and/or financing costs fall.

Click to download: