6/22/2017 What is Hindering Solar Roof Top Sector In India  BW Businessworld

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21 June, 2017by Naina Sood

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What is Hindering Solar Roof Top Sector In India?

India’s total installed rooftop solar capacity is estimated at only 1,247 megawatts (MW) (till 31 December 2016) which is about 3 per cent ofthe targeted 40 GW by 2022.

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The renewable energy target of 175 gigawatts (GW) by 2022 is making progressive headways. Solar power plays a central part inachieving this goal and installation of utility scale power has seen a dramatic increase in the past 12 months. Rooftop Solar,however, is still lagging and a lot more needs to be done to achieve its 40 GW capacity target by 2022 within, the bigger target.

India’s total installed rooftop solar capacity is estimated at only 1,247 megawatts (MW) (till 31 December 2016) which is about 3per cent of the targeted 40 GW by 2022. 

The study released by Indian Council for Research on International Economic Relations (ICRIER) states that the total investmentrequirement to meet the outstanding 38.75 GW rooftop solar target, after considering the current subsidies is Rs 1.8 trillion ($28 billion). Despite of a tenfold growth in the rooftop solar capacity, a lot of ground still needs to be covered.

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6/22/2017 What is Hindering Solar Roof Top Sector In India  BW Businessworld

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CAPITAL INVESTMENTS UNITS

1 Residential + Government (With Capital Subsidy) Rs 43856.28 Crore

2 Industry + Commercial (Accelerated Depriciation) Rs 136723.35 Crore

3 Total Costs in INR Rs 180579.63 Crore

4 Total Cost in USD $27781.48 Million

Capital Investments needed for outstanding 38.75 GW of Rooftop Solar In India by 2022

Source: ICRIER Report: Scaling Rooftop Solar Power In India • Get the data Created with Datawrapper

Given the considerable gap between currently installed and expected capacity by 2022, there is a greater need for investmentsin rooftop solar. So what are the major barriers that are hindering the rooftop solar segment to take off in its full potential?

One of the major hurdles noted in the study, is the high upfront costs for installation, which is a barrier for many. The size of atypical rooftop solar installation in the commercial and industrial segments is around 150-200 kilowatts (kW), costing betweenRs 9.7-13 million, assuming the current price of Rs 65,000 per kW.

Commercial and industrial consumers are often reluctant to invest such a high amount upfront, especially for a non corebusiness activity.

Second is the issue of finance. Due to perceived high risks and suspicion about performance, banks are unwilling to lend to solarrooftop projects and the borrowing costs can be as high as 14 per cent or more.

Furthermore, the market for the third party debt capital from bond issuance is still marginal in India. In fact most of the rooftopsolar projects in India are being financed with equity capital with minimum or no debt. Due to the smaller size of the projects,the developers do not approach banks for loans because of the proportionately higher transaction cost per unit of the projectcost. As the cost of the equity capital is usually more expensive than debt, the overall project cost also becomes more expensive.

Third comes the perception of risks and performance among the consumers themselves. Rooftop solar still remains a relativelynew technology in India and thereafter there is a perception that it may not perform as expected over its lifetime. The reportgoes on to add that there is a trust issue as several entrepreneurs in the rooftop market are comparatively new with no or littletrack record.

Although 27 states have issued net metering policies or regulations, only a few states have begun the actual implementation ofthe policy. ‘Net metering’ is a mechanism of selling the surplus power generated, which is them net amounted in theconsumer’s electricity bill.

Without net metering, the solar rooftop economics could go for a toss, especially as the third part model comes in where theowner of the solar plant at a consumer’s roof is not the consumer himself, but the developer. The slow or patchy progress in thenet metering policy can be attributed primarily to issues like inadequate policy framework, passive opposition from DISCOMsand insufficient training at the local utility level.

“Implementation of rooftop solar is taking place at a much slower pace and it seems unlikely that the government wouldachieve its 40GW target by 2022. Specific policy initiatives to support rooftop solar especially effective net-meteringimplementation and offering incentives in order to attract financial investors’ needs to be introduced”, mentioned anotherreport released by industry lobby group PHD Chamber of Commerce and Industry and credit rating agency CARE Ratings, lastmonth.

There is another major challenge in the form of storage. Currently the cost of a rooftop solar system with battery storage couldbe between Rs 90,000 and Rs 1, 35,000 per kW, depending on the voltage.

The study jointly done by ICRIER, Stockholm Environment Institute (SEI) and Climate Policy Change (CPI) also pitches for localgovernment’s participation as a much better proposition, given that fact that rooftop solar is a decentralised form of electricitygeneration. The study proposes a bond model in which municipalities can play an active role in raising debt capital for privatedevelopers under third part financing (OPEX) model, reducing the costs of debt capital.

“The main advantage of the proposed public debt based financing OPEX model for rooftop solar is that compared to the privatedevelopers; municipal governments are in a better position to raise capital by issuing bonds. They posses relatively large sizebalance sheets which can have the financial strengths and capital to raise finances. This also includes guarantee from the stategovernment which places them in a better position to secure guarantees on bonds, as compared to the private developers.

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