Scaling up rooftop solar panel
India has set an ambitious target of achieving 175 GW installed renewable energy
capacity by 2022. India has set an ambitious renewable energy target of 175 GW
by 2022, including 100GW of solar energy. Of that, the government aims for 60
GW to be utility-scale solar, and therefore the rest to be rooftop solar. Though
India has made significant progress on the 60 GW utility-scale solar target, getting
to the 40 GW rooftop solar target will be a significant undertaking. As of
December 2016, the installed capacity of rooftop solar was only ~1.25 GW, which
means that ~6 GW would need to be installed every year to reach the 40 GW target
by 2022. Rooftop solar panel is 727 MW with a capital requirement of INR 38.5
billion and 110 MW with a capital requirement of INR 6 billion respectively.
Of this, 100 GW has to be achieved by solar energy, including 40 GW from small-
scale, solar rooftop photovoltaic systems. This high share of 40 percent indicates
the government’s intention of developing this decentralized power generation
segment.
Rooftop solar PV has the potential to provide many benefits to the Indian power
network in terms of reducing overall transmission and distribution losses, ensuring
better voltage regulation at grid tail-end, and, most importantly, allowing
consumers to generate their own power. Major solar energy markets including
Germany, Japan, the US, and Australia, have a very high share of rooftop PV in
their overall solar PV capacity, ranging from around 35 percent in Japan to 75
percent in Australia.
This paradigm will pave the way for multiple small investments, eventually
contributing to increasing the overall power generation capacity in the country.
These countries have experienced smaller gestation periods of solar rooftop PV
projects when compared with large-scale utility ones. Therefore, the replication has
been faster in this segment.
In India, the policy framework for both ground-mounted, and rooftop PV projects
was laid together under Jawaharlal Nehru National Solar Mission in 2010. This
emanated into Phase 1 for ground-mounted projects, and Rooftop PV and Small-
Scale Generation Project (RPSSGP) schemes respectively.
However, the implementation of solar rooftop PV projects hasn’t matched that of
ground-mounted solar PVs. The current installed capacity of solar rooftop PV
systems is very low — at around 170 MW — when compared with that of ground-
mounted systems, which have a capacity of around 7,000 MW.
The Indian government has started taking a number of steps to address these
challenges and ensure the continuous implementation of rooftop PV systems.
These include providing capital subsidy to the residential segment; including
rooftop PV in house loan or house renovation loan; including renewable energy in
priority sector lending with a limit of ₹15 crore debt per project; encouraging
small projects like rooftop PV, and issuing clear gross and net-metering
policies/regulations.
As a result of these efforts, there has been decent traction in the implementation of
projects. However, a strategy that addresses specific distribution licensee-related
challenges still needs to be devised and implemented carefully.
The adoption of rooftop solar is primarily driven by expected savings in electricity
costs, the necessity for an alternate source of electricity, and therefore the desire to
mitigate global climate change risk. However, three key barriers hinder the
expansion of this technology in India: high upfront cost, perceived performance
risk, and limited access to debt capital. To address the primary two issues, CPI has
previously advocated for a 3rd party financing model.
Municipalities have several market advantages in their potential role as finance
aggregators for rooftop solar.
Institutional goals and mandates
Municipalities have target-based responsibilities to increase renewable energy
deployment under the Solar City Program, so they have a built-in incentive to
increase rooftop solar.
Access to debt capital markets
Compared to rooftop solar developers, municipalities are during a better position to
access the debt capital market thanks to their larger balance sheets
Superior credit profiles
Quite half the rated municipalities – 94 in total - are investment grade (i.e. BBB- or
above); whereas most rooftop developers are below investment grade. The higher
credit profile of municipalities compared with project developers can help in
raising debt capital at lower costs.
Access to public guarantees
Compared to non-public project developers, municipalities as public entities have
relatively better access to public guarantees that are typically required to realize the
risk-reduction necessary to draw in institutional investment.
Diverse revenue sources
Municipalities have multiple sources of revenues (e.g. property taxes), which may
provide additional security to investors.
Good consumer engagement
Given municipalities’ relatively good proximity with the consumers, the govt can
quickly facilitate rooftop solar project aggregation.
The challenges
If the full potential of rooftop PV is to be harnessed, the challenges facing the
segment need to be addressed. These include policy, regulatory, financing, and
implementation, encompassing the entire project lifecycle.
The initial policy, of keeping the buy-back price from both types of projects at par
with each other (RPSSGP scheme of Ministry of New and Renewable Energy, and
Indian Renewable Energy Development Agency Limited, and SERC specified the
same tariff for rooftop PV and ground-mounted PV projects) has pushed investors’
interest towards large, ground-mounted solar PV ones — they expect to get better
returns from them.
Thereafter, over-inclination towards net-metering regulations in the country further
hampered the rate of its implementation, as this mechanism is more beneficial to
commercial or industrial consumers than residential ones — retail electricity tariff
of commercial consumers is higher than the cost of solar power.
In addition, they can also avail of accelerated depreciation (AD) benefits. Thus,
most installations in the country have come up in the commercial and industrial
segment, leaving behind residential consumers or a segment that provides more
roof space in India.
Additionally, small rooftop PV projects are largely ignored by lenders due to their
small ticket sizes.
In the long term, rooftop PV will be economically beneficial to the entire society.
However, distribution licensees may face operational and commercial challenges
in the short-term, as their fixed costs are rarely recovered by the fixed component
of retail tariffs they charge from consumers.
Each unit of electricity not supplied to consumers due to power being supplied by
the solar rooftop PV system will have an adverse impact on the distribution
licensees they will have to forego some part of their fixed cost, if not energy
purchase, or variable cost. This could also be the reason why distribution licensees
have been gradual in issuing detailed implementation processes and guidelines for
approving and connecting solar rooftop PV systems.
Why we do need licenses for Rooftop Solar PV
Distribution licensees are critical to the development of solar rooftop PV, as they
will be key institutions in providing approval for installation, electricity as well as
balancing services and management of the overall grid. It is essential that they
become the main drivers of this program and play the role of demand integration,
coordination, and implementation of projects.
It is important that some performance-enabling financial support is provided to
them to accelerate the deployment of rooftop PV systems within their area of
operation. The financial support to incentivize distribution licensee can be sought
from the National Clean Energy Fund (NCEF).
To sum up, it can be said that by taking distribution licensees on board and
continuing to address other challenges, swift deployment of solar rooftop PV
projects, while meeting set targets comfortably, is possible.
