In 2014, the government set a new target for renewable energy installations to have at least 40 GW of power come from rooftop solar products in India by 2022 and 60 GW from utility-scale or ground-mounted projects. However, unlike other developed countries like Germany, where rooftop solar was successful in gaining public support for green energy, the government in India has focused more on promoting utility-scale renewable energy.
Despite the rapid growth of utility-scale solar, with major companies competing for projects, falling tariffs, and government support for large-scale projects, Rooftop Solar (RTS) has not seen the same level of attention.
This growth was initially driven by government initiatives such as Solar Energy Corporation of India (SECI) bids and mandates for installing various types of solar panel installations in government buildings and public offices. However, this growth has leveled off in some states. Despite the interest of many companies to adopt solar energy, inconsistent policies have remained a major obstacle, particularly for power distribution companies.
Some Figures To Put This Into Perspective
According to the website of the Union Ministry of New and Renewable Energy (MNRE), as of November 2021, out of 40 GW of installed solar capacity, only 6,111 MW (or 15%) was RTS. Additionally, during 2020-2021, rooftop solar installations accounted for 1.9 GW, compared to
3.5 GW for utility-scale solar.
A recent report by the MNRE reveals that RTS numbers in most states are low. Even in urbanized, high-income Delhi, which had been allocated a subsidy for a capacity of about 30 MW of RTS, only 20% of the target was achieved.
According to data from the Ministry Data, more than 75% of all installed rooftop solar products in India majorly exist in commercial and industrial sectors. The other segments include residential and public places. Industrial Rooftop Solar (RTS) installations saw growth of 50-60% from 2014-15 to 2018. However, in the last couple of years, the growth has slowed down to 1-1.5 GW annually due to several factors, including the COVID-19 pandemic.
The MNRE had assigned a subsidy for a capacity of about 3,000 MW of RTS to many states, but so far, only 699 MW (or 23%) has been installed. In comparison, smaller countries like Vietnam have installed over 9,000 MW in a single year, making India a laggard in the RTS segment globally.
Industry Scenario
Industry leaders have noted that many types of solar panel products started to gain popularity among various consumer segments before regulations became more restrictive by state governments and power distribution companies.
The Union power ministry had previously proposed a rule in its first draft of the Electricity Rights of Consumers Rules, 2020, that required net metering for loads up to 10 kW and gross metering for loads more than 10 kW. However, Nitin Gadkari, the minister for micro, small, and medium-sized enterprises (MSME), and other industry experts opposed this decision.
One of the significant challenges facing the RTS sector is the lack of clear regulations for net metering. Net metering is a system that enables consumers who generate surplus power from their RTS systems to sell it back to the grid. However, the compensation provided by the distribution companies for this surplus power is often inadequate and inconsistent, making it a significant obstacle to the adoption of solar products for home across India.
The commercial and industrial segment is the most expensive for Discoms, which means that cross-subsidy charges are imposed to recover the costs of supplying free or low-cost electricity to other segments. Ideally, customers should be able to use both net meters and gross meters. Ideally, customers should be able to use both net meters and gross meters. The central government needs to play a bigger role in driving uniformity in policies and measuring states against their targets.
Distribution company (Discom) executives say that they don’t want to lose their highest-paying customers to RTS systems. Most states only allow RTS systems below 1 MW, even when the customer’s load is much higher.
The MNRE Phase II subsidy scheme’s most significant flaw is that it freezes the prices of residential RTS panels for as long as 18 months. Since the costs of solar products in India and other input costs are highly volatile, it’s impossible to predict their prices in advance, making any pricing a guess. Residential RTS are highly specialized and quality-dependent, and many customers want their own customizations, which may incur an additional cost. A one-price-fits-all approach does not account for the disparities within a market.
Final Words
The role of the distribution company (discom) in the RTS framework needs to be rethought as it consistently loses revenue from RTS, creating a conflict of interest. Since the growth of RTS heavily relies on the regulatory framework. The slow growth is primarily attributed to the lack of state-level policy support for rooftop solar products for home and commercial places, which makes up the majority of target consumers.
Therefore, the RTS needs easy financing, unrestricted net metering, and an easy regulatory process. Public Financial Institutions and other key lenders could be mandated to lend to the segment and adapt existing bank lines of credit to meet the challenges of the Indian RTS segment.
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