How it works
Under banking, a generator's surplus in one block is credited to the consumer and drawn back in another. The state electricity regulatory commission writes the rules, and the utility keeps the account. The rules set the banking period, which may be a month, a quarter or a year. They set the hours in which banked energy can be withdrawn, often excluding the evening peak. They also set what happens to energy left at the end of the period, which may lapse or be bought by the utility at a low rate.
The utility charges for the service, usually by deducting a share of the banked energy in kind, sometimes as a cash charge per kWh. Accounting runs block by block or by time-of-day slot. Solar output above daytime load is banked and drawn back at night or on cloudy days. National green energy open access rules in 2022 set minimum terms for banking. Each state still sets its own charges and limits, and revises them.
Why it matters
Banking decides how much of a solar or wind plant's output a buyer can use at another time. Without it, surplus must be sold, stored or curtailed, which changes the economically optimal plant size. Banking can let a larger plant cover more consumption, within the permitted withdrawal hours and limits. A rule change can move a project's value more than a change in tariff, so developers and buyers both model it explicitly.
A worked example
A solar plant produces 300,000 kWh in a month beyond the factory's daytime load. The state deducts 8% as a banking charge, so 300,000 × 0.92 = 276,000 kWh can be drawn back at night. At a grid tariff of ₹7.5/kWh, that avoids 276,000 × ₹7.5 = ₹20.7 lakh of purchases. If banking were not allowed and the surplus sold at ₹2.5/kWh, it would earn 300,000 × ₹2.5 = ₹7.5 lakh. Banking is worth ₹13.2 lakh that month.
Illustrative figures.
Across markets
Banking in this form is specific to India. In the US, the nearest equivalent is net metering, which credits surplus from on-site systems against the bill, at retail or a lower rate depending on the state. Large US buyers with virtual PPAs need no banking, because settlement is financial. In Europe, surplus is sold to a supplier or into the market, and the buyer buys power back separately.