The rooftop solar power sector in India

A report titled Scaling up Rooftop Solar Power in India: The Potential of Solar Municipal Bonds highlights the current scenario and possible way forward for the rooftop solar sector in India. It delves into the potential of municipal bonds as a means to finance the scaling-up of rooftop solar and lays out in detail the design and implementation for the same.

For India to achieve its national target of 40 GW of renewable energy by 2022, the rooftop solar sector needs to increase 32 times its present capacity. As of December 2016, the total installed rooftop solar capacity is 1.25 GW, the largest share of which has been deployed by the industrial sector, followed by the commercial and then the residential sector. The industrial sector is expected to meet the remaining target and to host a target of 12.06 GW, it has to increase its capacity by about 37 times. Assuming that the residential and public buildings will contribute 10 GW to rooftop solar by 2022, they need to increase their shares by 21 times to meet the national targets.

The considerable gap between installed and expected capacity can be met by 2022 only with significant investments in the rooftop solar capacity. These investments are subject to the costs of solar panels, capital, labor and operations, and levels of national and state-specific subsidies and taxes.

The key factors that drive the adoption of rooftop solar in India include:

• the expected cost savings in electricity:

  The gaps between rooftop solar and conventional sources of electricity is decreasing quickly. In the residential sector, it has already achieved grid parity in states like Maharashtra, Uttar Pradesh and Rajasthan. Rooftop solar has become competitive in the government sector in Haryana, Delhi, Uttar Pradesh, Andhra Pradesh and Karnataka.

• energy access (need for an alternative electricity source): the issue of access to affordable power plagues Indian households in both rural and urban areas as 304 million people still lack access to electricity (NITI Aayog 2017), despite the rapidly decreasing power deficit across India. In such a context, rooftop solar provides a less harmful and price-volatile alternative.
• “green” benefits: the social image of being “green” and environment-friendly appeals to some consumers in the commercial, industrial and public sectors, even if it means paying higher than grid power or making capital investments.
• and government mandates i.e. the need to mitigate climate change risk: the government and state-wise Renewable Purchase Obligations (RPOs) apply only to the industrial and commercial segments. The government prescribed solar-specific RPO is set to rise to 3% by 2022.

Given these drivers, the growth of rooftop solar technology in India is still hampered by multiple barriers. These barriers need to be resolved adequately by the measures that will accelerate the adoption of rooftop solar in India.

• High upfront capital expenditure or costs of installation for a non-core business activity
• Limited access to debt and finance: The suspicions around performance in this relatively nascent sector make banks reluctant to lend to solar rooftop projects, thereby leading to high borrowing costs. Developers thus, do not approach banks for loans, especially for smaller size projects due to the proportionately higher transaction cost. In addition to this, the third-party debt capital market (bond issuance) in India is still marginal. Thus, most rooftop solar projects in India are being financed with equity capital with minimal debt during development stages (BNEF 2016). As the cost of equity capital is usually more expensive than debt, the overall project cost then becomes more expensive.
• Consumer perception of performance and risks: As a relatively new technology in India, rooftop solar is not always expected to perform as expected over its lifetime. There are also trust issues since the new entrepreneurs in the market do not have much of a track record yet.
• Challenges in the implementation of net-metering policies: 27 states and union territories have issued policies as per the 2013 model net metering regulations but only a few have started actual implementation. The poor/slow progress can be attributed to issues like passive opposition from DISCOMs, inadequate policy frameworks and insufficient training at the local utility level.
• High costs of energy storage: Since solar power can be generated only during the day time, energy storage is crucial for ensuring night time usage or during times of low solar radiation. The current prices of rooftop solar systems with battery storage can be INR 90,000-1,35,000 per kW depending on voltage. The issue of consumer-owned, behind the meter energy storage can become less pressing if effective net-metering policies are properly implemented and supported by front-of the meter and grid- based storage.

 
India Outbound
November 1,2018
 
 
 

source https://indiaoutbound.org/the-rooftop-solar-power-sector-in-india/