• New mechanism to encourage daytime electricity consumption
• Consumers urged to reduce electricity use during evening peak hours
• Competitive bidding proposed for new solar projects
• Govt. plans to limit annual rooftop solar capacity additions to 200–250 MW

The Government has decided to discontinue the existing net-accounting system for rooftop solar electricity consumers and introduce a new mechanism based on instantaneous offsetting to reduce electricity system costs and manage growing solar generation, The Sunday Morning learns.

The proposed mechanism would offset electricity generated by rooftop solar installations against electricity consumed at the same time, replacing the existing arrangement under which consumers can effectively use surplus electricity exported to the national grid during daytime hours to offset electricity consumed at night.

Under the current net-accounting system, some rooftop solar consumers can effectively reduce their electricity bills to zero by exporting surplus generation to the grid. However, The Sunday Morning learns that this does not necessarily mean such consumers impose no costs on the national electricity system.

According to a senior Government official close to the subject, during daytime hours, when solar generation is already abundant, additional electricity exported by rooftop installations may have limited economic value. 

In certain circumstances, excess generation must either be curtailed or stored in batteries, both of which have financial implications for the electricity system. Consumers exporting electricity during the day and drawing electricity from the grid at night are effectively using the national grid as a storage facility, although electricity supplied during these two periods carries significantly different economic values.

According to the official, the existing system does not adequately account for this difference, creating a situation where consumers who generate sufficient solar electricity to offset their bills have little financial incentive to reduce consumption during expensive evening peak periods.

It is understood that the new approach would better reflect the actual value of electricity at different times of the day, with similar arrangements already being implemented in countries such as Australia.

Meanwhile, the Government is also planning to moderate the pace of solar power expansion over the next three years, with proposed capacity additions substantially below the installation levels recorded during the previous year.

The Sunday Morning learns that approximately 900–1,000 MW of solar generation capacity was added last year, while the proposed expansion plan envisages approximately 1,500 MW of additional solar capacity over the next three years. Of this, around half could be allocated to rooftop solar installations, resulting in an estimated annual addition of approximately 200–250 MW.

Nevertheless, the fact that only around 150,000 of the country’s approximately seven million households have installed rooftop solar systems is understood to have raised concerns among electricity system planners. The Government’s position is that the number of households without solar installations cannot determine the volume of additional generation the national grid can accommodate, as electricity demand and the timing of generation remain critical considerations.

The Sunday Morning also learns that the Government is considering introducing competitive bidding for new solar generation projects, replacing the existing first-come, first-served system of granting approvals. Under the proposed mechanism, developers would compete for available grid capacity by submitting the prices at which they are prepared to supply electricity.

For instance, where the electricity system can accommodate only 250 MW of additional solar capacity despite developers expressing interest in installing 1,000 MW, projects offering electricity at the lowest prices could be prioritised. 

The proposed auction-based system is expected to reduce electricity procurement costs while ensuring that the financial benefits of renewable energy development are passed on to consumers. While attractive tariffs were previously necessary to encourage renewable energy investments, the increased availability of developers is expected to allow electricity procurement through more competitive pricing arrangements. 

The proposed reforms are also intended to improve transparency in allocating limited grid connection capacity and reduce reliance on approval mechanisms based primarily on application order.

However, when contacted by The Sunday Morning, National System Operator (NSO) Chairman Dr. Pradeep Perera said that the Government was considering several billing and metering arrangements under the Net Plus scheme to provide appropriate incentives for prosumers to invest in small-scale Battery Energy Storage Systems (BESS).

He explained that these arrangements would encourage consumers to store surplus solar energy generated during the daytime for use at night, while shifting discretionary electricity consumption, such as Electric Vehicle (EV) charging, to daytime hours to reduce nighttime demand.

Dr. Perera further stated that zero-export connections would be promoted in areas where the grid’s capacity to absorb additional solar generation was constrained by overloaded transformers.

He noted that the proposed changes would encourage solar investors to optimise the use of solar-plus-BESS systems in a manner that benefited the national power system while ensuring adequate returns on their investments.