With the costs of going solar, coming down, almost halving over the past 3 years, the take off stage for solar rooftop is fast approaching. The state utilities are well poised to take advantage of the increased attractiveness and feasibility of the solar rooftop model for multiple customer segments. Let us look at the different segments in general and then specifically, segment wise, to evaluate the role that a utility
can play in increasing adoption of solar rooftop plants by consumers.
The state utility company directly responsible for distribution for example, Tata Power and BSES in New Delhi and DHBVN in Haryana, and similarly others in different states are in direct contact with the customer. Through a simple data drill down, each utility company knows exactly who are the large power consumers and the electricity bills for each customer in their jurisdiction/ area. The past history of electricity bills and therefore, the consumption month wise is also available. The payment history, payment mode and the vintage of each customer is also transparently available. All the ingredients for generating a customer score are available – industrial, commercial or residential customers included.
This customer score is very similar to a financial score that a consumer credit providing organisation works on, such as a NBFC or a Bank in India. The customer score generated via the utility company is slightly different in the sense, it focuses on the utility spends, payments and defaults if any on the same for the customer.
The utility companies need to view the opportunity of managing efficiently the SRISTI program for the development of the rooftop program as envisaged by the government. The overall subsidy planned spend is upwards of 3.3 billion USD. The utility companies have to realise that the economic feasibility of installing solar rooftop is so attractive, that the momentum shall build up and resistance to it makes no sense. Till now, the utility companies have opposed fearing that they will lose out on the paying consumers, from the institutional and large / bulk consumers such as factories. Similar fears existed when open access route was opened up, for bulk consumers who could buy power from the cheapest source available from the power trading exchange.
The current base of renewable power is around 27 GW of capacity, which was less than 3 GW in 2014. The acceleration in terms of installed capacity has been due to the falling module costs, and installation costs. Similar phenomenon will be witnessed in the rooftop segment as well. While utility scale grid power has increased in the recent past, and rooftop has lagged behind, the utility providers have to get the act together and increase their share of rooftop customers by offering attractive long term schemes for going solar to their customers with high scores. While this may be true for the large rooftop customers, who are often spoilt for choice, because of the competing offers by EPC providers, a larger segment of decentralised rooftops- the residential segment is wide open. The utility and the distribution entity can organise the awareness building and the dissemination to this small rooftop segment, and offer financing as a mechanism for going solar. With increased feasibility, and repayment history that is already with the utility extending credit becomes easier for any financial institution. The added comfort of a utility / distribution company being involved makes it easier to control in a sitution where there is risk of repayment. Consumers also tend to default lesser, fearing complete loss of connection. With reduced electricity bills, consumers will be attracted and often paybacks can be realised in less than 4 years on solar rooftops. For more attractive schemes, the tenure could be kept longer resulting in a better IRR over long term. With lower defaults, there is an arbitrage opportunity around financing of 1-3% for the distribution entity that owns the customer relationship. A financial vehicle that can be in collaboration with the NBFC or the Bank, can run the entire piece on solar rooftop financing. This can be a multi billion dollar market opportunity by itself and provide a cushion around the vanilla returns in the power business. The additional savings generated through an improved demand side management scenario with reduced peak load power purchase will further help.
Distribution and utitlies should embrace the opportunity and set up market places and other mechanisms that are customer friendly. These platforms can serve as awareness and lead generators. Several market players like Urja Unlimited can work with the local distribution licensees to help increase conversion rates and adoption of solar rooftop. Typical costs on setting up a small solar rooftop can be found by visiting this blog on Setting up a Solar Rooftop : What does it take ?
