In short. Behind-the-meter generation is any generator, battery or solar plant on the customer side of the utility meter, run for purposes beyond emergency backup: cutting maximum demand charges, supplementing a constrained DISCOM connection, running CHP, or keeping a process alive through poor grid supply. It should start from the electricity bill, the load curve and the cost of an outage, not from an equipment choice, and its savings must be modelled for the specific tariff before they are promised.
What sits behind the meter
The utility’s energy meter marks the billing boundary. Everything on the customer’s side, including diesel and gas gensets, solar PV, battery storage and CHP plants, is behind the meter. A standby generator that only runs during outages is technically behind the meter too, but the term usually refers to plant that runs deliberately while the grid is available, to change what the site buys from the DISCOM. In Telangana and Andhra Pradesh the motives are usually high demand charges for HT consumers, a sanctioned load that cannot be raised quickly, poor supply quality on rural feeders, or a heat demand that makes CHP attractive.
Start with the business problem
The wrong first question is gas or diesel. The right one is which economic or operational constraint the site is solving. The possible objectives are distinct and lead to different designs.
| Objective | What the plant does | Typical technology | Key data needed |
|---|---|---|---|
| Resilience | Carries critical load through outages and poor supply | Diesel or gas gensets with ATS, BESS for ride-through | Outage history, critical load list, cost of interruption |
| Peak management | Runs during demand peaks to cap billed maximum demand | BESS, fast-starting gensets in parallel | Fifteen or thirty minute demand profile, tariff structure |
| Capacity support | Supplies load above the sanctioned grid connection | Prime gensets, BESS, solar | Sanctioned load, connection upgrade cost and timeline |
| Energy cost reduction | Generates energy below the grid tariff | Solar, gas CHP | Tariff per kWh, fuel price, operating hours |
| Combined heat and power | Produces electricity and useful heat | Gas engines with heat recovery | Heat demand profile, gas supply |
Diesel generation is rarely cheaper per kWh than an industrial grid tariff, so diesel behind the meter is usually justified by resilience or capacity, not by energy cost. Gas CHP and solar are the technologies that can lower the energy bill itself. Peak management is mostly a battery job now, as described under peak shaving.
The load profile decides the size
A serious assessment uses interval data from the DISCOM meter or a site logger over at least several weeks, ideally a year. From it come the base load, the maximum demand and how often it occurs, the operating hours, and the shape of the daily curve. Overlay the outage history and the tariff structure: fixed demand charges per kVA, energy charges, time of day rates where they apply, and power factor incentives or penalties. A plant that only needs to shave 200 kVA from a peak lasting forty minutes a day needs a very different solution from one that must supply 2 MW for twelve hours.
Annual saving = (ΔMD × D × 12) + (E_gen × (T − C_gen))
ΔMD is the reduction in billed maximum demand in kVA, D is the monthly demand charge per kVA, E_gen is the annual energy generated in kWh, T is the grid energy tariff per kWh avoided, and C_gen is the cost per kWh of generating it including fuel and maintenance. Worked example (illustrative): a plant reduces billed demand by 300 kVA at a hypothetical demand charge of 475 rupees per kVA per month, saving 300 × 475 × 12 = about 17.1 lakh rupees a year. It also generates 150,000 kWh from a gas engine at 7.20 rupees per kWh against a grid tariff of 7.80 rupees, saving 0.9 lakh rupees. The demand saving dominates, which tells you that a battery may serve this site better than an engine. Use the actual tariff order and fuel quotations; these numbers only show the method.
Parallel or non-parallel
Behind the meter does not mean isolated. A non-parallel scheme separates the generator from the grid with an ATS or interlocked breakers, so a part of the load moves to the generator while the rest stays on the grid. It needs no utility approval for interconnection but cannot reduce demand smoothly or share load. A parallel scheme synchronises the generator with the grid and controls its output against the site import. It allows peak shaving, base loading and CHP operation, but introduces synchronising equipment, interface protection including loss of mains, reverse power and directional overcurrent, fault level checks on the existing switchgear, metering and DISCOM approval in line with CEA connectivity rules. The engineering detail is in utility paralleling. Export to the grid is a further step with its own regulatory requirements and should not be assumed possible.
Technology choices and their trade-offs
Engines
Diesel sets give resilience and capacity at low capital cost but high running cost, and their emissions under CPCB IV+ and state consent conditions limit long-hour use in some locations. Gas engines suit long running hours, especially with heat recovery, as described for trigeneration and CHP.
Batteries and solar
A BESS responds in milliseconds, suits short peaks and provides ride-through, but its energy is limited by its kWh rating. Solar lowers daytime energy purchases but does nothing at night or in an outage without storage. Combinations are covered under hybrid power systems, and larger multi-engine plants under gas engine power plants.
Common mistakes
- Buying an engine to cut the energy bill when the bill is dominated by demand charges. The plant runs many hours and saves little.
- Promising a fixed percentage saving before the tariff and load curve are modelled. The real result disappoints and the project loses credibility.
- Paralleling with the grid without checking the existing switchgear fault rating. The added fault contribution exceeds the breaker capability.
- Ignoring outage risk in the model. The plant is optimised for savings but cannot carry critical load when the grid fails.
- Running a diesel set for long hours without checking consent conditions. The state pollution control board limits operating hours or requires additional controls.
What to send us
Send twelve months of electricity bills, any interval meter data, the sanctioned load and contract demand, the outage log, and a list of critical loads with their consequence of interruption. Add nameplate details of existing generators, UPS and solar, and a single line diagram if you have one. Use the application engineering enquiry and we will model the options against your tariff before recommending equipment.
Questions engineers ask
Can a diesel generator reduce my electricity bill?
Rarely through energy cost, because diesel generation usually costs more per kWh than an industrial grid tariff. It can reduce demand charges if run briefly at peaks in parallel with the grid, but a battery often does that more cheaply. Diesel behind the meter is mainly justified by resilience and capacity.
Do I need DISCOM approval to run a generator in parallel with the grid?
Yes. Parallel operation requires an interconnection approval, a protection scheme with loss of mains and reverse power functions, and appropriate metering. Non-parallel operation through an ATS or interlocks generally does not need interconnection approval, though the generator itself still needs the usual statutory clearances.
What is the difference between behind-the-meter and captive generation?
Behind the meter describes physical position on the customer side of the billing meter. Captive generation is a regulatory status under the Electricity Act and its rules, with ownership and consumption conditions, and can include plant located away from the site. A behind-the-meter plant may or may not qualify as captive.
How much data is needed to size behind-the-meter generation?
At minimum several weeks of interval demand data covering normal operation, plus twelve months of bills to capture seasonal variation and maximum demand events. A year of fifteen minute data is ideal. Sizing from connected load alone almost always oversizes the plant.
Technical content reviewed by Srinivas Reddy, Managing Partner, Reddy Generators. Last updated 19 October 2026.