When the Sun Meets the Meter: Striking the Rooftop Balance

Summary:

Gujarat’s rooftop-solar (RTS) boom exposes a policy tightrope: net metering delights households with four-year paybacks but slashes Discom revenue, gross metering safeguards utility coffers yet curbs adoption, while net billing—tuned to the right feed-in tariff—hits the sweet spot. Leveraging CSEP’s RTS Model and real-world cost, tariff, and subsidy data, the blog argues that smart meter-side tweaks, not megawatt-scale subsidies, will determine whether India’s 40 GW RTS target soars or stalls.

The Backdrop

Rooftop solar (RTS) offers distribution companies (Discoms) a win-win—easing local grid stress, postponing costly upgrades, and helping India stride toward its 500 GW renewables goal. With the launch of the PM Surya Ghar: Muft Bijli Yojana (henceforth PM Yojana), the government is redoubling efforts to spur household-level installations, with special emphasis on low- and middle-income families (PIB, 2024).

The scheme provides capital subsidies of up to Rs 78,000 (MNRE, 2024). Capital support helps, but the real determinant of viability is how exported solar power is metered and compensated. Net metering, net billing, and gross metering can swing a household’s payback period by years and can significantly impact distribution companies (Discoms) finances.

Gujarat, India’s RTS frontrunner with 3.3 lakh RTS installations (~1.23 GW) (TOI, 2025), shows what’s at stake. Using the CSEP RTS Model (Shanbog, Rao, & Tongia, 2025) we test three typical households under all three metering regimes, estimating:

• Payback periods for consumers
• Net-present-value (NPV) impact on Discom income

Here, Discom income captures the energy-charge impact under each metering regime. Fixed charges are excluded, since RTS customers continue to pay them.

Metering Made Easy: How Different Policies Credit Solar Exports

How is surplus RTS power credited? Whether a noon-time unit exported offsets a night-time withdrawal, is bought by the Discom at a discount, or is booked separately decides both household payback and utility revenue.

Before we turn to the Gujarat simulation, one question matters most: how is surplus RTS power credited? Whether a noon-time unit exported offsets a night-time withdrawal, is bought by the Discom at a discount, or is booked separately decides both household payback and utility revenue. India uses three templates—net metering, net billing and gross metering. Knowing how each works is crucial for expanding RTS while keeping Discom finances intact.

1. Net Metering – Solar first meets the home’s load; any excess is credited 1-for-1 against later imports (typically at evening/night). Bills reflect only the net kWh over the month, with any surplus carried forward or cashed out at a preset feed-in-tariff (FiT) rate. This delivers the best payback for consumers, but—because it values daytime exports the same as costly evening imports—it can erode Discom revenue.
2. Net Billing – Self-consumption still comes first, but all exports are metered separately and bought by the Discom at a fixed FiT that is lower than the retail rate. Consumers lose some savings compared to net-metering, yet Discoms recover more of their supply costs, making the arrangement fiscally fairer.
3. Gross Metering – Every unit generated is sent to (and paid for by) the grid at a regulated FiT; the household buys all its power at normal tariffs. This clean separation shields Discom finances, but offers the weakest economics for consumers unless the feed-in tariff is set attractively high.

Three Households × Three Metering Rules

We modelled Gujarat’s RTS economics for three typical homes and three metering options.

Table 1: Profile of three types of households engaged in the study

Notes: Author’s RTS system design, calibrated to annual usage, achieves the fastest payback under net-metering

The model captures Gujarat-specific RTS realities – regulatory tariffs (GERC, 2024) plus market factors such as capital costs and loan terms. With the FY25 net-metering FiT fixed at Rs 2.25/kWh, we stress-test viability under net-billing and gross-metering across four export rates—Rs 2.25, 2.75, 3.25, and 3.75/kWh—to reveal how higher compensation can ensure better returns when the base FiT falls short.

Building on these tariff scenarios, the cost stack assumes capital outlays of Rs 65,000, Rs 1,87,500, and Rs 3,00,000 for the three system sizes, each with a 25-year life, standard module degradation, and an inverter swap in year 15. Central Financial Assistance under the PM Yojana is applied by capacity (Table 2), while annual household demand is set to rise 5–6 percent—faster for smaller users—mirroring real-world growth; all remaining parameters are detailed in Table 3.

Table 2: Central Financial Assistance under PM Yojana for the three rooftop solar system sizes

Source: (MNRE, 2024)

Notes: *Total system-cost quotes from multiple Ahmedabad, Gujarat based integrators, averaged and rounded up.

Table 3: Values of other parameters used in the model

Notes: ^ Based on interactions with system integrators assuming a 3–4 kWh/kWp yield range;, results pertain solely to 3.75 kWh/kWp; ^#Loan terms from PM Yojana national portal; †Solar module degradation of 545 Wp Mono PERC module (Manufacturer: Waaree Energies Ltd. ) is considered; ‡ Price includes GST and is based on a Growatt make inverter, a comparable model is assumed for real-world installations.

Payback Clock: When do Solar Modules Pay for Themselves?

Net metering wins hands-down: 4 – 5 years across the RTS sizes because midday exports offset evening imports at the full retail rate. Every surplus unit is credited at the household’s own (often high-slab) tariff, maximising bill savings. The typical internal rate of return (IRR) for the systems is in the range of 21-28%.

Net billing stretches payback to 6 – 9 years (9-17% IRR) for different FiT rates simulated across RTS sizes; exports earn only the lower FiT instead of the retail rate, and households still pay the full fixed charges on their remaining grid purchases – unless they boost daytime self-consumption (we assume 45 % alignment) or FiTs rise, the gap stays wide.

Gross metering is the least attractive option for consumers: unless the FiT exceeds much beyond ₹ 3.75/kWh, payback stretches beyond 20 years. The reason is simple—every solar unit is sold to the grid at the FiT, while the household must repurchase all its electricity at the retail tariff much higher than FiT.

Table 4: Consumer payback and Internal Rate of Return for different metering policies for different FiT rates across different RTS sizes

Source: Author-calculated values based on the three metering methods and model parameters.

Utility Ledger: What Happens to Discom Revenue?

Net metering credits daytime exports at the customer’s top-tier tariff, erasing Discoms’ highest-margin sales. Bigger RTS systems magnify the hit—high-consumption households offset more of their peak-priced evening demand with cheaper mid-day solar hour exports, steadily deepening the revenue shortfall. As Figure 1 shows, across all system sizes, net-metering leaves the Discom worse off than either net-billing or gross-metering. The revenue hit grows sharply as rooftop capacity—and the customer’s annual consumption—increase.

Net billing Net billing strikes a middle path: prosumers self-consume and sell only their surplus at a fixed FiT that sits below the retail tariff, so there’s no one-for-one offset of their imports. This lets Discoms keep their full energy-charge billing, earn a positive margin even at modest FiTs, and puts far less strain on cross-subsidy and tariff structures than net metering.

Gross metering shields the discom’s balance sheet: every kilowatt-hour generated by the rooftop system is purchased at a fixed (and usually lower) feed-in tariff, while the customer still buys all of their electricity at the full retail tariff. This preserves the discom’s sales revenue and keeps its tariff structure intact.

Figure 1: Discom Income Net Present Value for the different metering policies for different RTS sizes and Feed-in Tariff rates

Source: Author-calculated values based on the three metering methods and model parameters.

Figure 2 compares Discom revenue for a 5 kWp rooftop system under the three metering regimes across a range of feed-in tariffs (FiTs). Two patterns stand out:

1. Gross metering consistently delivers the highest revenue—outperforming net metering and net billing at every FiT level.
2. Lower FiTs boost Discom income under both gross metering and net billing, reinforcing the inverse relationship between FiT level and utility revenue in these two models.

Figure 2: Discom Income Net Present Value with 45% solar aligned consumption for three metering policies for a 5 kWp RTS system

Source: Author-calculated values based on the three metering methods and model parameters.

Policy Take-aways

Getting Metering Right Is the Linchpin

Rooftop solar will scale only if both sides of the meter win.

• Consumers move fastest when paybacks are short.
• Discoms invest only when revenues remain whole.

Table 5: Metering Policy Showdown: Consumer Payback vs. Discom Income Impact

Source: Author’s analysis

Our Gujarat simulations show that no single metering scheme—net metering, net billing or gross metering—delivers both outcomes perfectly. The policy task, therefore, isn’t picking a winner. It’s mixing and matching—tailoring system-size limits and time-of-day FiTs, so that households still see an attractive return and Discom balance-sheets stay healthy. Craft that balance, and rooftop solar can evolve from a growing success to a cornerstone of India’s 500 GW renewable-energy journey.