Last updated: July 2026 · By Sri Ishaan Solar

Captive Consumption vs Net Metering: Which Solar Model Fits Your Factory or Business?

Every industrial and commercial solar buyer in Telangana eventually asks the same question after the roof survey: should we size this system to match exactly what our factory uses during the day, or install a bigger system and export the extra to the grid? The answer changes your system size, your payback period, and even your paperwork with TGSPDCL or TGNPDCL. Here's how to think it through.

Two Different Ways to Size the Same Rooftop

Most homeowner solar decisions boil down to "how big a system can my roof and budget support." Industrial and commercial buyers face a second, more consequential decision layered on top of that: how the system relates to the building's own electricity consumption.

Captive consumption (self-consumption) sizing means the solar system is deliberately sized close to what the factory, mill, or shop actually draws during sunlight hours — typically 9 AM to 4 PM. The goal is for the building to use almost everything the panels generate, in real time, with minimal or no surplus flowing back into the grid. There's little or no dependence on a favourable export arrangement because there's barely anything left to export.

Net metering means the system connects to the grid through a bi-directional meter, and any surplus generated beyond what the building consumes at that instant is exported and credited back against the bill, under rules set by the DISCOM (TGSPDCL in the Southern circles, TGNPDCL in the Northern circles). Some commercial buyers size their systems larger than their immediate daytime load specifically to take advantage of this export credit.

Both approaches use rooftop or ground-mounted solar and both need DISCOM approval — the difference is in intent: match the load, or generate more than the load and lean on export credit to make the extra capacity worthwhile.

How Captive Sizing Actually Works

For a factory, rice mill, or commercial building, captive sizing starts with a load study, not a roof-area calculation. We look at:

• Your operating hours and shift pattern — a single-shift unit running 9 AM to 6 PM has a very different daytime load profile than a 24-hour cold storage or a rice mill running seasonally.
• Base load vs peak load — motors, dryers, curing fans, compressors, and chillers that run continuously during the day form your "floor," which solar should ideally sit just under.
• Monthly TGSPDCL/TGNPDCL bills over at least 3-6 months, to see how consumption varies and to separate day-time units from night-time units (since solar can only offset the former without storage).
• Sanctioned load / contract demand, since DISCOM rooftop solar capacity is tied to this figure, not to roof area alone.

The sizing target in a captive-first approach is usually 80-95% of average daytime load, deliberately left slightly under rather than over — because any small day-to-day variation in load then gets absorbed by the grid instead of triggering meaningful export volumes you'd need a favourable settlement policy to monetise.

How Net Metering Works for Commercial & Industrial Connections

Net metering is a well-established, government-backed arrangement in Telangana, but the rules for commercial/industrial (C&I) connections are not identical to residential. Based on published TGSPDCL/TGNPDCL rooftop solar and net metering guidelines:

• Telangana runs a net billing model — a bi-directional meter nets your import against your export, and you're billed (or credited) on the difference, rather than being paid a separate feed-in tariff for every exported unit.
• Commercial, industrial, and other large-scale consumer categories are generally capped at a lower share of sanctioned load for net metering than residential — commonly cited around 80% of sanctioned load/contract demand for these categories, versus up to 100% for residential and government connections, subject to transformer and feeder capacity.
• HT (11kV/33kV) connections have additional feeder and substation transformer capacity constraints on cumulative rooftop solar, and go through a separate application fee and feasibility process from LT connections.
• Application processing typically involves DISCOM acknowledgment, a feasibility study, and then installation and commissioning — a multi-week process for anything beyond very small systems.

Where net metering gets more nuanced for C&I buyers is in how surplus/exported units are actually settled — the banking period (monthly vs annual), and what happens to unused credit at year-end. These specifics change from time to time and can differ for commercial/industrial categories versus residential, and some states have been tightening banking rules for C&I rooftop solar in recent years to protect DISCOM revenue from high-paying commercial consumers. We recommend confirming the current TGSPDCL or TGNPDCL commercial net metering settlement terms — banking period, year-end surplus treatment, and any export rate — directly with your DISCOM or with us before finalising a system size built around export credit.

Captive Consumption vs Net Metering — Side by Side

The Real Tradeoff Industrial Buyers Are Weighing

Strip away the paperwork and it comes down to a fairly simple comparison, once you have real numbers:

• Value of a self-consumed unit = your commercial/industrial tariff (around ₹9.5/unit in our calculator's model, though your actual slab may differ) — this is locked in and doesn't depend on any DISCOM policy decision.
• Value of an exported/banked unit = whatever your DISCOM's current net billing and settlement rules credit you, which needs to be confirmed for your specific category and connection type, and which can be revised by policy over time.

When self-consumption value is meaningfully higher than export value — which is the common case for commercial tariffs against typical DISCOM settlement practice — the arithmetic favours sizing tighter to your load (captive-style) over maximising system size for export. The exceptions are usually buyers with: seasonal operations and idle months where a larger system still pays back through banked units used later in the year; genuinely large, cheap roof or land area where the marginal cost of extra capacity is low; or confirmed, currently attractive DISCOM export terms for their specific consumer category.

There's also a middle path many of our commercial clients land on: size for close to 100% daytime self-consumption now, but leave conduit, meter, and structural headroom to expand later if load grows — rather than over-building today against an export policy that may look different in two or three years.

Where Banking and Settlement Terms Change the Decision

"Banking" — carrying forward surplus solar units generated in one month to offset consumption in a later month — is one of the most consequential and most frequently revised parts of any state's net metering policy. In principle, it lets a factory that generates more solar than it needs in, say, cooler months bank those units against higher summer consumption. In practice, banking rules for commercial and industrial consumers have been getting tightened in several states, with shorter banking windows and lower or capped payouts on unused year-end surplus, because DISCOMs are wary of losing revenue from their highest-paying customer category to rooftop solar exports.

This is exactly why we don't build a captive-vs-export recommendation around an assumed banking benefit. If your business genuinely has a seasonal load pattern — a rice mill idle for part of the year is the clearest Telangana example — banking can still meaningfully change the right system size. But the current banking period, carry-forward rules, and year-end settlement rate for your specific DISCOM and consumer category need to be confirmed before they go into your ROI math, not assumed from a generic online example.

What We Check Before Recommending Either Model

When we do a commercial energy audit for a factory, rice mill, or shop, sizing the system is the last step, not the first. Before we recommend captive-style sizing or a net-metered system with export headroom, we look at:

• 3-6 months of actual TGSPDCL/TGNPDCL bills, to see real consumption patterns, not estimates.
• Sanctioned load / contract demand, and whether you're LT or HT, since this sets your net metering capacity ceiling regardless of roof area.
• Shadow-free rooftop area available, and whether ground-mount or shed-mount options exist if roof space is the constraint.
• Operating hours, shift pattern, and seasonality — especially for rice mills and other seasonal processing units.
• Whether accelerated depreciation, OPEX, or CAPEX ownership fits your business better, since that affects how much appetite you have for a larger upfront system.
• Current TGSPDCL/TGNPDCL net metering category rules, application fees, and settlement terms applicable to your exact connection type at the time of application.

Frequently Asked Questions

What is the difference between captive consumption and net metering for commercial solar?
Captive consumption means sizing the system close to your daytime load so you use almost everything on-site, with minimal export. Net metering means installing a system that connects through a bi-directional meter and gets credited for any surplus exported to the grid, under DISCOM rules.

Is net metering available for commercial and industrial connections in Telangana?
Yes, through TGSPDCL and TGNPDCL, though commercial/industrial/large-scale categories are typically capped at a lower share of sanctioned load (commonly cited around 80%) compared to residential connections, and HT connections have additional feeder/transformer capacity limits. Confirm current caps and fees with your DISCOM.

Does export credit for commercial net metering pay the same rate as residential?
Not necessarily — settlement treatment, banking periods, and year-end surplus rules can differ by consumer category and change over time. Since commercial tariffs (around ₹9.5/unit) are already higher than residential (~₹7.5/unit), self-consumed units are usually worth more than exported ones, but you should verify current terms rather than assume.

Should my factory size solar for self-consumption or for maximum export?
For most factories and commercial buildings with steady daytime load, sizing for self-consumption gives faster, more predictable payback. Sizing larger for export only makes sense with confirmed favourable DISCOM terms or a genuinely low-cost roof/land expansion. A load study settles this either way.

What data does Sri Ishaan Solar need to recommend a sizing approach?
At least 3-6 months of TGSPDCL/TGNPDCL bills, your sanctioned load, operating hours/shift pattern, and ideally a load curve or machine-wise load list, so we can model daytime consumption against expected generation.