India has set a path to achieve 100 GW power capacity through grid-connected solar energy, out of which 40 GW is targeted to come through rooftop solar installations by 2022. Till date, considerable efforts have been put in place to develop the rooftop solar photovoltaic sector in India by the government, regulatory commissions and concerned agencies. Basic framework now exists in the country and implementation of rooftop solar power plants has started in true sense. However, considering the targets committed by India including in the international forums with respect to rooftop solar photovoltaic plants, there is still huge scope for development of the market and addressing the barriers faced by the stakeholders in the sector.
The modular nature of solar PV systems makes them highly adaptable for use on vacant rooftops. The benefits associated with rooftop solar PV systems are multifold. For a developer, it includes reduced land and interconnection costs, higher tariffs due to increasing commercial and industrial tariffs, and increased profitability. Rooftop solar PV assists distribution companies (DISCOMs) by reducing the peak demand during daytime and decreases transmission and distribution (T&D) losses as the power is consumed at the point of generation. According to PwC analysis, more than 10,000 MU of electricity will be saved as avoidance of T&D losses alone in year 2022 alone if 40 GW rooftop PV is achieved. Further, commercial benefits in avoiding investments in transmission system are huge. Finally and most importantly, it reduces the dependence on grid power, diesel generators and is a long-term reliable power source for consumers.
The evolution of solar rooftops in India has witnessed a significant transformation to reach a phase where all but one Indian state has issued net metering guidelines to promote solar rooftops. In terms of technology, the quality of components has increased and there have been drastic reductions in costs. In fact, SECI rooftop bids got quotations as low as INR 53,000 per kW in Gujarat, Maharashtra and Tamil Nadu and a quotation of INR 45,100 for North-eastern special category states. The electricity tariffs under the Renewable Energy Service Company (RESCO) mode have similarly come down to Rs 4.5 per kWh in Rajasthan and Rs 3 per kWh in certain special category states. This comes just 7 years from the time when utility scale plants had signed agreement at tariffs of over Rs 17 per kWh, signifying an almost 75% reduction in tariff.
There are now around 1,000 rooftop installers in the country who have been certified as channel partners by the Ministry of New and Renewable Energy. These players have been classified under various categories based on their performance parameters. There are now multiple innovative mechanisms of rooftop implementation such as projects being financed by the Developer itself under the RESCO mode and then ownership being transferred to the site owner after a fixed number of years. Also, large players such as Tata Power and Hero Future Energies have established separate divisions that cater only to rooftops installation to gain an early entry into the massive 30 billion USD market in the project development space alone.
In order to propel the market, the Government has further instituted multiple enablers such as a 30% capital subsidy on the system cost for systems being implemented on residential rooftops, benefits of accelerated depreciation of 40%, encouraging financing of systems under the priority sector and lower interest rates.
However, despite the enablers; as of September 30, 2016, India had achieved a solar rooftop installed capacity of around 501 MW, as against the year 2022 targets of 40GW. The capacity even till date is only around 1 GW, in comparison with utility scale installations that in March 2017 exceeded 11 GW.
Typically, the growth of rooftop solar in a country goes through three phases. Starting with the proof of concept phase that involves demonstrating the success of the technology, as in Germany’s 1,000 rooftop programme that initiated the advent of rooftop solar in the country. Second comes the market transformation phase, wherein focus is on building capacity in the market and raising awareness about the technology. The most important role herein is of the market facilitators, typically the Government. India is currently passing through this phase. The final phase is the self-replication phase, wherein enablers are reduced to a minimum and the market forces with optimized technologies itself lead to an increasing number of installations. This is the phase that countries such as Japan and Germany are currently in.
Indian Government had instituted a decrease in CFA from 30% to 15% for solar rooftops in August 2015. However, it was reinstated in November 2015 for residential buildings. This strengthens the belief that the second market transformation phase is currently underway. Recent discussions with multiple corporates have resulted in the inference that corporates are increasingly planning to implement solar rooftops without subsidies because of the economic advantages offered. This indicates that the initiation of the third phase is also underway.
The need of the hour is to address issues and challenges hampering the growth of solar rooftops across the country. As per a survey conducted in November 2016, although there are net metering guidelines in place but because of lack of experience and maturity in the market, participants from 12 states and 6 UT’s mentioned that their distribution licensees are still at a stage of announcing the detailed procedures to grant connectivity to rooftop solar plants. Further, across the states, it may take 3-4 months from the date of application to receiving grant of connectivity even for a residential rooftop solar system. There are further shared approvals and clearances between multiple departments such as the regulatory commission, state nodal agencies, DISCOMs, urban local bodies, etc. which may cause delays.
From a consumer perspective, there are complexities involved in procedures of various departments, because of which they have to take out significant time from their day to day activities to get the project installed, avail CFA, apply for grid connection and follow up on bill settlement by the distribution licensee. Another major challenge is the non-availability of skilled and trained manpower. This couples with loosely drafted rooftop leasing agreement and sharing of roles and responsibilities between the developer and the rooftop owner.
The most promising method of implementation is currently the RESCO mode. However, as the risk of this mode is on the developer they are not willing to implement systems under this method with beneficiaries that do not have an impeccable rating or previous track record. Systems under such mechanisms are hence typically installed only on big corporate houses and not on smaller consumers. The market share of smaller consumers is what needs to be captured here, but the decentralised nature of installation of small systems at multiple locations does not result in significant returns for the developer and economies of scale.
In terms of distribution, there are limits on the total amount of electricity that can be injected in the grid at one point owing to the transformer capacity at that location. This is not a significant barrier currently but may emerge as number of installations go up. There is a perception that the success of solar rooftops can be detrimental to the business of Discoms in the sense that they lose out mainly on prime customers that were paying their charges in full and on time and those that were paying higher tariffs too. Other grid related issues such as effect on voltage control, quality of power, grid protection issues, forecasting and scheduling issues are other factors that have to be taken care of.
It has been almost 2 years since India’s ambitious solar scale up targets were put into place. The progress on implementation till now has been commendable. We can be confident that the sector has gained significant momentum and attention to reach a level from where it is very unlikely that its growth will slow down in the near future. The inflection point for solar rooftops herein will be when the market enters the self-replicating growth phase as mentioned above, resulting in growth at unprecedented rates with an increased focus on solar rooftops as compared to utility scale installations. However, since the targets are steep over a 5 year period, the main question is when this inflection point will occur.