Rooftop solar has immense growth potential in India. However, the rooftop segment has been slow to get off the ground, thanks to inconsistent and restrictive government policy.
A total of 719 MW of rooftop solar capacity was added in 2020, a 34% decline year-over-year. Things turned around for the rooftop solar market in the second half of the year, with installations improving significantly. The fourth quarter was the strongest for rooftop installations, and the momentum was expected to continue into Q1 2021.
The second session on the second day of the Mercom India Solar Summit 2021 asked the all-important question, ‘Can Rooftop Solar Come out of Ground Mount’s Shadow and Be The Next Big Thing?’
The session was moderated by Mercom India’s Managing Director, Priya Sanjay. The panel included: Abhishek Ranjan, Vice President, BSES Delhi; Shishir Singh, Assistant General Manager Tata Power DDL; Pinaki Bhattacharyya, Managing Director, and CEO AMP Energy India.
Rooftop Solar a Laggard
The rooftop solar sector has been lagging for a long time behind utility-scale solar installations. Cumulative installations crossed the 5 GW mark at the end of 2020, according to Mercom India Research. There is a long way to go with another 35 GW to be installed by 2022 if the target of 40 GW has to be met.
In terms of states, Gujarat leads in rooftop installations contributing to around 26% of the country’s installations, followed by Rajasthan and Tamil Nadu. Gujarat’s dominance in the rooftop segment can be attributed to highly rated DISCOMs, coupled with favorable policies.
The residential segment has been growing at a slow pace but has enormous potential if backed by government subsidy. There is a strong surge towards rooftop installations from the C&I sector, which saw 33% installations in the last quarter of 2020.
The levelized cost of energy (LCOE) of rooftop solar is on an average 50-60% lower than commercial and industrial retail electricity tariffs in various states in India. This makes for a great case for commercial and industrial consumers to install rooftop solar to save on their energy bills.
Even with rooftop solar being cheaper, it still has a long way to go and needs a push from the government to come out of large-scale solar’s shadow.
The Delhi Model
Ms. Sanjay wanted to know from Shishir Singh of Tata Power the reasons behind the success of rooftop solar in Delhi.
According to Singh, almost all DISCOMs in India are struggling, and the AT&C losses are around 22% pan-India. “When we started back in 2002 in Delhi, we had 56% losses, and this year, we have closed our books at 8% loss. We call it a victory curve that saved thousands of crores for the government. When it comes to other states, particularly in rural areas, we see 60-70% losses. Three functional areas need to be thoroughly covered – technical, commercial, and enforcement. With these three areas covered, AT&C losses can be brought down significantly.”
Singh said that the government had invested heavily in technical infrastructure with programs such as IPDS (Integrated Power Development Scheme) with almost ?1 trillion (~$13.32 billion). “The key to mitigating AT&C loss is to focus on commercial activity- installation of meters, recording its readings, minimizing the provisional billing, among others,” he said.
10 kW Net Metering
A few hours after the Mercom India Solar Summit concluded, the Ministry of Power issued a draft amendment to the Electricity Act, under which the 10 kW net metering cap is proposed to be raised to 500 kW.
According to Pinaki Bhattacharyya from Amp Energy, rooftop solar installations were on the rise until 2018, across the spectrum, including both residential and commercial. Gross metering started in 2018.
“Incidentally, the government financing for the segment was poor since it fell into the hands of banks, who were not disbursing loans effectively, especially at a time when the segment was growing. In the midst of all this, the government started tinkering with net and gross metering, making the market uncertain. The 10 kW restriction will kill the sector. We have to co-exist with the DISCOMs, who are also getting privatized. The system cannot be turned to save just the DISCOMs; we need a platform where we can co-exist,” he said.
He added that no serious developer or investor would accept the cap on net metering. “Even SECI is not floating tenders because of this policy confusion.”
Singh said, “Since most DISCOMs are run by governments, they would not want solar installations to eat away their revenue. Tata promotes residential solar for socio-economic reasons. We take the help of Tata Power Solar for installations and finance our consumers through Tata Capital; we are covering the entire value chain. In fact, consumers of TP-DDL can get their installations done at reasonable costs through Tata Power Solar.”
According to Abhishek Ranjan from BSES Delhi, “We asked ourselves ‘what is the value of rooftop solar which needed detailed commercial and technical studies to assess who our target is- residential or C&I.’ In 2018, we started a solarization project to solarize our residential consumers, although we are not ignoring our other clients including MSMEs and C&I. Yet the focus was on residential, and we have never looked back.”
Reforms
Bhattacharya told the session that the capacity restriction on rooftop solar installations should be abolished. “Rooftop installations have a very low environmental impact since no land acquisition is needed. Secondly, OPEX plants are well maintained than CAPEX plants and should be encouraged. DISCOMs that are privatized are working smoothly, but those that aren’t are using the regulatory framework to hinder rooftop solar installations. We hope that an amendment to the Electricity Act will fix this issue.”
On the financing side, although there are multi-lateral lines of finance available, the disbursement never took off effectively.
“Channelizing finance into the sector is crucial, and the government needs to declare solar sector under priority sector lending. We are left on our own. There is no clarity regarding the feed-in tariff when it comes to gross and net metering. It is essential that the government raises the cap on net metering to 250 kW or 500 kW. The feed-in tariff has to be fair.”
Ranjan said, “The real question is why should DISCOMs resist rooftop solar. It is because the C&I segment is adopting it and if they adopt it fervently, and they are the ones who are feeding the cross-subsidy quantum. With them going over to solar, the DISCOMs will lose out on the quantum. Historically, the portfolios of DISCOMs across India are far greater than our baseload. Therefore, the cost structure needs to be reworked. DISCOMs are worried if their fixed cost components are not met or even reduced.”
According to Bhattacharya, the larger challenge is module pricing due to duties that will adversely impact rooftop installations’ viability. “There are four factors in the Indian sector- Consumer, Generator, Financier, Government. Solar is very attractive for the customer. On the financing side, several rooftop consumers do not have the right credit rating. As a result, projects are not bankable. It requires credit enhancement tools. A consistent policy will help generators, especially policies that help push the sector upwards. Rooftop solar in its current form cannot overshadow utility-scale; it can only if the government implements the right policies. The government needs to issue proper clarifications on all its policy matters.”
According to Mr. Ranjan, DISCOMs are unwilling to forego the C&I segment to rooftop solar as they bear the cross-subsidy burden, so they need to instead reduce the subsidized base (the residential consumers) by pushing and supporting them to deploy rooftop solar.
