Against the target of 40,000 MW of rooftop solar power capacity by 2022, India has installed just about 2,538 MW as of March 2018.
New Delhi: With less than four years left to meet its target of installing 40,000 megawatt (MW) of rooftop solar power capacity by 2022, India has installed just about 2,538 MW as of March 2018, a full 94 per cent short of target.
At this rate, missing the target is a foregone conclusion, which also jeopardises the country’s overall solar target of 100 gigawatt (GW, equal to 1,000 MW) by 2022.
Rooftop solar has been a key part of the recent renewables revolution around the world, and its appeal is clear — residential, commercial and industrial buildings can generate their own electricity, which is green and potentially less expensive than the power they draw from the grid. What’s more, they can inject excess power back into the grid and get paid for it.
India’s ambitious target, in fact, is backed by a 30 per cent subsidy for residential buildings. But this has failed to enthuse home owners, the majority of whom pay small electricity bills and find the cost of solar equipment prohibitive in comparison.
Commercial and industrial building owners have shown more enthusiasm as their large power bills justify the expense of solar power systems, even though they get no subsidy. But here, policy and regulation are blocking the way, say a range of industry participants, including installation businesses, consultants and power distribution companies (discoms).
“The government needs to do much more if it is serious about the 40 GW target,” Sanjeev Agarwal, Managing Director and CEO of Amplus Solar, one of the largest rooftop solar installations companies in India, told IndiaSpend.
After India announced the Jawaharlal Nehru National Solar Mission in 2010, rooftop installations went from zero to grow annually at a compound annual rate of 117 per cent between 2013-14 and 2017-18.
In 2015, the Ministry of New and Renewable Energy announced its 40 GW target and subsidy for home-owners and began to urge state governments to announce policies to enable net-metering, a billing mechanism that enables power consumers to be paid for injecting renewable power into the grid.
The segment has since grown to install 2,538 MW as of March 31, according to the consultancy Bridge to India. This gives rooftop solar a 10 per cent share in India’s overall solar capacity installation, with large-scale and off-grid solar installations cumulatively nearing 22,000 MW during the same period.
On the plus side, the industry is at “an inflection point” right now, Agarwal of Amplus Solar said. “Rooftop solar is a well-established, well-understood sub-sector now, not the hard sell it was when we started four years ago,” he said. “The technology is well established, and costing has come down 40-50 per cent to a level where adoption is quick.”
The earliest and most eager adopters of rooftop solar have been commercial and industrial users, accounting for 544 MW and 1,088 MW of capacity installation, as per Bridge to India. “They have large rooftops and large consumption, and are able to break even in 3-4 years,” Kanika Khanna, Director, SunkalpEnergy, which brings together rooftop owners and solar system installers, told IndiaSpend.
Across India, grid power tariffs vary by state, but generally, residential tariffs are subsidised and quite low for small users (roughly Rs 5 per kilowatt-hour), but get progressively higher for larger users (around Rs 7.75 per kilowatt-hour).
That makes the wealthier home-owners also interested. For the vast majority of home-owners, however, the subsidised power from the grid is so cheap that it does not make economic sense to spend on expensive solar power systems. This is why only 503 MW have been installed on private homes.
As an inducement, the renewables ministry gives home-owners a 30 per cent subsidy on the cost of equipment. “But the process is long-winded and involves many permissions,” Khanna said, which can take up to four months, “Though in some states you could wait for up to a year and a half!” For small retail consumers such as households, that is too long a wait.
For this reason, “Nobody is looking at subsidy anymore”, Agarwal said, “[Businesses] don’t want to get into the residential sector because the subsidy is not enough, the paperwork is too much, you are forced to use domestic equipment that is not the best in the market, and then get an inflated invoice because companies want to claim more subsidy.”
Installation businesses instead want to focus on commercial and industrial rooftops. But here, too, the government must urgently improve the ease of doing business, Agarwal said.
In addition to the various approvals mentioned before, commercial and industrial customers are held back by other regulatory hurdles. For one, most states’ net-metering policies allow a roof owner to inject into the grid only a proportion of their sanctioned off-take from the grid.
So, facilities such as warehouses, for instance, which need power only for lighting purposes and hence have small “sanctioned loads”, are prevented from installing greater rooftop generation capacity and using the full potential of their vast rooftops.
Perhaps the biggest challenge the rooftop solar segment faces is opposition from discoms. To keep residential tariffs low, utilities charge higher tariffs from commercial and industrial customers to cross-subsidise residences. As high-paying commercial and industrial customers begin to use rooftop systems, their bills shrink, reducing discom revenues and forcing them to further raise commercial and industrial users’ tariffs, setting off an adverse cycle.
In theory, utilities would gain as more users moved to rooftop systems because it would cut down their transmission and distribution losses — recorded at a whopping 19 percent in 2014. All rooftop capacity installed in their license areas also goes towards offsetting their renewable purchase obligations, under which discoms must source a portion of their power use from renewable sources.
However, at the moment, these benefits are dwarfed by the drawbacks.
“In the current scenario, there is no incentive for discoms,” Vinay Rustagi, Managing Director, Bridge to India, told IndiaSpend. “Not only do they lose their high tariff paying customers, they also have to undertake extra efforts to upgrade distribution infrastructure and provide free metering and banking services to rooftop solar projects.” Banking means injecting excess energy into the grid which can be later claimed at a charge.
Utilities need financial and operational support to encourage the rooftop segment, Rustagi said, and new business models must be devised which give discoms the role of a service provider that gets compensated for its efforts of facilitating installation and use of rooftop solar systems, as well as the loss of its business.
To this end, the renewables ministry in December 2017 proposed a scheme, called Sustainable Rooftop Implementation for Solar Transfiguration of India (SRISTI), to make utilities the central agencies responsible for installing rooftop solar power plants in the residential sector while offering them a subsidy on installation costs in addition to incentives based on capacity added.
Some utilities support this scheme, saying their existing interface with consumers can be put to good use. The trust that exists between the consumer and the utility is absent between the installer or the developer, Jitendra Nalwaya, Additional Vice-president at the private utility BSES Delhi, told IndiaSpend. He said commercial and industrial rooftops account for larger volumes of capacity installation, but the residential segment is important to create a culture that gives renewable rooftop installations primacy in the interest of long-term sustainability.
However, critics point out, a one-time subsidy is not enough. A June 2018 study by Council on Energy, Environment and Water (CEEW), BSES and Shakti Sustainable Energy Foundation suggested several alternative business models that give utilities a central role in installing rooftop systems as well as in collecting user fees, from which they would earn revenue, while eliminating the need for rooftop owners to make any upfront expenditure.
“Whichever models are eventually approved, effective implementation is the key as past moves have suffered from bureaucratic glitches,” Rustagi said, “Also, as electricity is a concurrent subject, buy-in from state governments is crucial for the growth of this market.”