Solar Rooftop programs have not taken off as anticipated, and this article serves to understand the main issues that plague the segment.
The vast majority of India gets year-round sunshine; therefore, India possesses immense potential for harnessing electricity in solar energy. In recent years, Solar is one of the fastest-growing and talked about energy generation resource, globally in the form of alternative energy for homes and commercial buildings.
In 2015, before the UN climate change conference in Paris, the Indian Government announced its Solar Energy ambitious targeting of achieving 100 gigawatts (GW) of solar energy by 2022. This was part of the total target of the 175 GW (Solar and other Natural sources) of renewable energy by 2022 that India announced at Paris. Out of 100 GW, a total capacity of 40 GW was to be achieved from the Solar Rooftop Energy (RTS) segment as per the clean climate commitments. Initially, the demand for solar rooftops in India was overwhelming, but gradually, the deployment of Solar rooftops has slowed down especially in residential areas. It is bound to pick up, in the future since the gap between the tariff charged and the lower pricing on solar rooftops makes this a very viable source.
Post 2015, almost every other Indian state had their own Solar policies. They all strived to achieve their individual targets to bring India closer to 100 GW mark. India set a target of 40-gigawatt capacity for Solar rooftop (SRT) by 2022. But so far, the achievement has fallen short of the goal. Against a target of 1000 MW for the year 2019 – 20, only 536.88 MW was achieved. Till 31 December 2019, total of 2333.23 MW of energy has been achieved from Solar Rooftop.
Reasons for a lag in growth of Solar Rooftops
Growth in the installation of rooftops especially in residential market lags due to combination of reasons:
- High upfront cost,
- lack of financing options from banks and
- lack of the standard products and customer awareness.
A large proportion of the urban population lives in high-rise buildings and apartments / multiple floors. In such system, the roof is shared or does not belong to a single family, with the latter system being more common in four-storey buildings. Since Solar Roof top is typically installed for the extended of time (25 years), it restricts the usage of the roofs for various activities like social gathering, sunbathing in winter and storage, etc. Also, unlike foreign countries, houses in India do not have standardized roofs and getting the required shade-free area presents a big challenge.
Also, for any project to be successful, public awareness plays a key role. The awareness level in India among the consumer related to Solar Rooftop is not enough. And those who have the knowledge or desire to obtain green energy are deterred by either no information on the process or absence of reliable sources to guide them through. Rooftop solar until now relatively new technology for the consumer in India and, therefore there is an intuitive perception among consumers that it may not work as reasonably expected for a longer period.
Current Pricing Trends for Solar Rooftops
The increasingly fierce competition in the solar industry has resulted in a price drop for rooftop installers. Installers are now offering extremely aggressive low tariff that has resulted in poor quality of solar panels and other associated material. Due to this reason, the customer finds it difficult to verify the prices quoted by Solar Rooftop vendors for the installation process.
The other most significant barrier to the rooftop solar in India is a high upfront cost for installation. The size of the typical rooftop solar in the residential segment is around 7-10 KW and installation costs lie between INR 40,000- 48,000 per KW even with a 20 – 40 percent capital subsidy. Because of such high costs, customers are reluctant to invest such high amounts upfront especially for a non- core business activity.
The state DISCOMS, also perform an important role in the proliferation of the Rooftop Solar System, as they provide various services such as approval for the installation, electricity balancing services; manage the distribution network and have the billing interface with the Rooftop owner. However, in many states notably with the most significant capacity in RE, the system of payments to power producers is not robust. Due to significant payment delays from DISCOMs, particularly to renewable energy developers, they face reduction in their returns on investment and debt servicing. This results investors, to be reluctant to make long-term investments in such projects.
When it comes to solar rooftop financing, limited access and opportunities are available for rooftop solar adoption despite there being a very attractive financial model that backs adoption of solar power. Due to perceived high risks and suspicion about performance, for this relatively new sector and mostly unfounded fears resulting from a lack of awareness or adequate inputs, banks are reluctant to lend to solar rooftop projects. The challenge is further exacerbated by the characteristics of project developers as many of them are private companies that have existed for less than five years and have limited assets to offer to banks as collateral to cover lending risks.
In India, Solar Rooftop is still at an early stage and there is a take off phase that it will enter soon. There is a need to coordinate across all the stakeholders to help this sector to achieve its true potential. There is an acute need to address market and consumer-related issues and constraints that hamper the growth and smooth implementation and capacity addition. It is also important to streamline procedures and processes for administering benefits quickly and efficiently. It requires a complete overhaul of systems from a DISCOM and state nodal agencies perspective and a much more friendly consumer approach.