COVER STORY: Rooftop Solar Enters Mission Mode In India

The signs were already there. In the first week of 2024, the Ministry of New and Renewable Energy (MNRE) created ripples in the Indian solar market when it announced a 23 percent increase in subsidies for residential rooftop solar. As per the government notification, the ministry increased subsidies from Rs 14,588/kWh to Rs 18,000/kWh for residential rooftop solar prosumers upto 3kW.

In the second week of the same month, the ministry issued another notification, asking the power distribution companies (discoms) to simplify the procedure for rooftop solar and demand minimum documents from the consumers to install the systems. Pain points like the Technical Feasibility Report documentation by local discoms, blamed for creating delays, were targeted. All this at a time when the sector was picking pace puts the spotlight firmly on it. As per a report from the Institute of Energy Economics and Financial Analysis (IEEFA), rooftop solar is thriving in the current fiscal (Year ending March ’24) and is all set to create new records. The latest figures from the MNRE said that India’s total grid-connected solar rooftop capacity stands at 11.08 Gigawatt (GW). This is merely 15 percent of India’s total solar installed capacity (73.32 GW).

But the crowning piece, no doubt, has been Prime Minister Narendra Modi’s announcement on January 22 of starting an ambitious rooftop solar scheme, ‘‘Pradhanmantri Suryodaya Yojana.’’ Under the new scheme, rooftop solar will be installed on the rooftops of one crore households. The spree of minor changes to simplify rooftop solar for households has assumed a new meaning and focus after the PM’s announcement. PSU financier REC India has also been announced as the nodal agency.

After all, as we have stressed in this magazine regularly, rooftop solar in the residential sector sorely needed a mission mode approach that the Prime Minister is known for, to make real progress. That India’s failure to meet its ambitious 100 GW target for solar by 2022 was primarily due to the misses on this account (with a target of 40 GW) would not have been lost on Modi as well. Even today, of the 11 GW of rooftop solar actually installed, the household sector accounts for barely 35%, with the rest taken by the C&I (Commercial & Industrial sector).

As always, the Prime Minister’s announcement seems timed to take advantage of the favourable winds that have already started blowing across the sector in the form of lower module prices and, of course, a domestic manufacturing sector finally coming into its own.

The IEEFA report we quoted earlier also said that in FY24, India could see its largest-ever yearly installations pegged at 4 GW. The researchers attribute this to the lower solar module prices, extension of the ALMM scheme exemption and increase in domestic solar module production.

The Gujarat Rooftop Story As per government data, around 30 percent of the total residential rooftop solar installations in India come from Gujarat. Ahmedabad-based Pulkit Dhingra is the Founder and Director of AHASolar Technologies Limited. AHASolar Technologies is a Clean Technology company creating an ecosystem for faster solar adoption that also assisted the Gujarat government & its Discom to set up its digital ecosystem for the government, discoms, installers, and consumers to cater to the needs of rooftop solar. Dhingra told Saur Energy that Gujarat has a track record of installing solar rooftop projects at a fast pace. “The best I have seen is rooftop solar installations within a week after application. On average, the connections are setup within three to four weeks. It all became possible because of the higher degrees of digitization,” Dhingra said. Dhingra explained that the state rolled out the digital version much before the MNRE’s National Solar Portal back in 2019-20. “This digitization empowered the consumers to apply online, allowed discoms to track all their backlogs, grant approvals and feed data. This also allowed the Discoms to track the progress in real-time. In Gujarat, with the advent of this automation system, the consumer hardly needs to venture into DisComs offices for any approvals. The entire work is done online. Just to sign the PPAs, the consumers and other stakeholders need some exercise,” Dhingra said. What is ailing the growth of solar irrigation in Bihar?  Also Read He also said that with more demand in the state due to increased awareness, the whole supply chain market got a boost and became stronger. “Gujarat is now one of the few Indian states with more than 3GW residential solar, 60 solar PV module manufacturers and more than 1000 solar installers (EPC players). Pulkit Dhingra Founder and Director of AHASolar Technologies Dhingra added, “Imagine an alternate scenario of how things might not have worked out. If there was not enough administrative will in the state Government. Or if there was a doubt in placing the belief in a young homegrown start-up’s vision and its ability to execute digitalization of the World’s Biggest Rooftop Programme implemented to date. The rooftop solar market wouldn’t have kickstarted as Gujarat caters to 80% of India’s Residential RTPV installation.” He added that Digitalisation, lest it be misunderstood, is about streamlining the simple processes. It’s time to scale the technology for Speed!” However, digitization was not the only component that bolstered the growth of rooftop solar in the coastal western state. Gujarat is also one of the few Indian states that allow residential consumers to install rooftop solar of capacities more than their sanctioned meter demand. It also offers a higher threshold limit under net-metering. Thus, a pro-solar policy, digitization, and higher demand created a stronger rooftop solar ecosystem here.

The Runway Before Liftoff For RTS?

So, with the spree of reforms, announcements and rooftop solar market forecasts, the sector is set to get a fillip. Industry experts termed this as a ‘golden time’ for the sector. Regarding the recent announcements from the Indian government towards rooftop solar, Gaurav Keswani, Vice President of Amplus Solar, said it is a ‘continuous process of reforms and simplification of procedure’. He said that the fate of rooftop solar has improved due to the slew of reformative measures in the sector. He also expects that in the months to come, the MNRE will develop more pro-rooftop solar policies to expedite deployments. Keswani also estimates that the Pradhanmantri Suryodaya Yojana alone could allow India to add up to 30 GW of new capacity. “As the scheme has been crafted for the rooftop solar segment, I expect this can add around 30 GW of new solar capacities in India if we take the average new connections of 3 KW capacity. This will open new vaults for the solar developers and the whole sector and pose new challenges. It will also require much support from the government and a free market to thrive.”

In saying this, Keswani and many other industry experts we spoke to might as well have been alluding to the MNRE’s Rooftop Solar Scheme (RTS)-I in 2015 and later relaunched as RTS-II and extended it till 2026 to achieve new targets. Till now, the scheme has consistently underperformed, stuck in a logjam of red tape, disinterested states, and, most importantly, perhaps, lack of awareness.

The result is that even in rooftop solar, it is mostly India’s top seven renewable-rich states like Gujarat, Rajasthan, Karnataka, Maharashtra, Tamil Nadu and others that share 78 percent of the total residential solar capacity of 10.4 GW (as on November 30, 2023). However, the industry players told Saur Energy that with the launch and continuous revamping of the National Solar Portal (NSP) they have witnessed an increase in queries for rooftop solar besides ease of applications and permits in other states as well.

As per the solar EPC players in the country, the National Solar Portal allows rooftop solar consumers to choose the vendors of their own choice. It also allows them the facility to track their applications, calculate their likely charges and get their deemed subsidies from the MNRE in a time-bound manner within 30 working days. This ensured the bypassing of offline applications and approaching the state nodal agencies for subsidies.

Grid-connected Rooftop Solar Installation Trends in India

Several solar developers (EPC firms) in India have also altered their working style after seeing potential in rooftop solar as a whole or in residential solar. For example, SolarSquare, a Mumbai based solar rooftop company that started its business in 2015, claims to have a presence in eight states and a track record of serving more than 10,000 consumers. After its initial tryst with commercial establishments, it has shifted focus to primarily serve the residential rooftop solar segment.

Shreya Mishra, Co-Founder of SolarSquare, told Saur Energy that things have started to change in the rooftop solar segment. “With the advent of National Solar Portal, subsidy disbursement has become streamlined, faster, and time-bound. Now, consumers get their subsidies within 30 days. Consumer awareness levels are also rising. Around 33% of our consumers come to us through word-of-mouth publicity. But RTS has mostly thrived in states where the states pushed it with more positive policies and implementing agencies (discoms) are pro-active,” she said.

Prevailing Challenges

Mishra also said that several discoms are now working to improve their efficiencies by shifting to more digital formats for feeding, monitoring data and giving online approvals. “One of the existing challenges now for the EPC player in many states is to coordinate with the National Solar Portal and another segregated system of different discoms which delays the process. With more integration of discom systems with the National Solar Portal, the whole procedure would become more streamlined in the coming days,” Mishra said.

Mishra explained that the most time consuming process in the segment post application is the period of meter load enhancement (Mishra says 70% of her consumers need it) and the commissioning of the rooftop solar with net meters. She said that while in states like Gujarat, the whole process takes a maximum of three weeks, in other states, the total period, on average, comes to around 60 days.

Meanwhile, experts said that state-level policies play a key role in the pace of deployment of rooftop solar. Ishan Chaturvedi, Co-Founder of Vareyn Solar, another EPC firm from Rajasthan, pointed out some state-level disparities in rooftop solar.

“Different states have fixed threshold capacities for net metering. For example, in Maharashtra, the threshold is up to 5 MW, in Gujarat, it is 1 MW, and in Rajasthan, it is 500 Kw. Higher thresholds allow smaller and mid-sized consumers to cut down their power bills with the use of net-metering. However, even Rajasthan’s behind-the-meter policy allowed upto contact demand and beyond net-metering propelled rooftop growth but still in many states there is lack of clear policies which can give a push to Rooftop Solar” Chaturvedi told Saur Energy.

Impact of module prices

2023-24 witnessed a slump in the global module prices, hitting the bottom. This allowed several solar developers to maximize their profits and also pass on some of the benefits to their consumers. With module costs accounting for 55-60% of systems, they say that the final installation prices per KW for rooftop solar consumers keep changing with the module prices.

Lower module prices decrease the installation cost for consumers, benefitting the Commercial & Industrial (C&I) segments more due to the issue of the ‘DCR only mandate.’ As per the mandate from the Indian government, under the Residential Rooftop Solar, only Made in India solar modules could be used, while for the C&I segment, modules assembled with imported solar cells and fully imported solar modules could be used.

A leading Indian solar EPC player said that a fully imported Chinese solar module would cost the least in such cases. He said that while a DCR module cost the firm around Rs 22,000 per KW, Indian modules with imported solar cells cost them around Rs 19,000 per KW. On the other hand, fully Chinese modules from leading global brands cost them anywhere around Rs 17,000 to Rs 18,000/ KW. Thus, residential solar modules cost more for solar developers in the country.

When Solar Pays The Solar Loan EMI Several industry experts and researchers Saur Energy talked to raked up the issue of financial hurdles in rooftop solar. As per the IEEFA report, the number of financiers for rooftop solar has increased with more participation from leading banks and NBFCs. As per the report, there are around nine financiers in India to finance solar rooftops. Some of the EPC players in India have also started facilitating solar loans from these financial institutions. Many also offer interest-free solar loans if taken for a smaller period like one year. Some firms like SolarSquare allow their sales officials (Solar Consultants) to get solar loans sanctioned via their own sales app within five minutes based on CIBIL scores online. They offer zero-interest loans for one year. Companies like Vareyn Solar are also offering another financial model where the majority of the capital needed for the solar rooftop projects are financed through monthly EMIs which can be paid through the total savings a consumer gets through its solar generation, as the EMI is lesser than Solar Bill Savings this way without spending much from his own pocket, the consumer starts getting the benefits of reduced monthly bills with the help of net-metering.

Surat-based Piyush Variya, Co-Founder & MD of solar module maker firm Sunora Solar, said that mono-PERC, bifacial, and half-cut modules are in demand for rooftop solar. “Owing to the mandate of DCR-only modules, the cost of those is higher for the EPC player, and thus, the cost of installation of residential often is more,” he said.

When asked about his experience on sales with the lower solar cell prices, he said, “Usually developers do not buy in bulk when solar prices keep on sinking. Most of them wait, anticipating further decline to maximize profits. It is mostly when stagnation hits; most EPC players try to make a deal,” Variya said.

Grid-connected Rooftop Solar Installation Trends in India

Gaurav Keswani from Amplus meanwhile said that rooftop solar is a highly competitive market, and the EPC players often need to share the benefits of decreased solar module prices to keep an edge. He said that 50 percent of the total project cost comes from the modules; thus, changes in their prices affect their business significantly.

Keswani points to the experience in developed markets to make the case for rooftop solar focus.

“Several developed nations have excelled in rooftop solar. With such a thrust in India now, we expect to start matching our rooftop capacity additions like developed nations. However, we also expect that more reforms are in the offing that will tackle other challenges. I think in the coming days, we can see policies that can deal with issues like how modules are priced, how meters are supplied to consumers, and financing too. Currently, some of the solar loans in India have one of the highest interest loans, whereas globally, the norm is that the interest rates for solar projects should not be double or 2.5 times those of home loans. In some cases, some banks/NBFCs offer solar loans at rates double home loans,” Keswani said.

Maitreyi Karthik, Regional Energy Analyst at USAID South Asia Regional Energy Partnership (SAREP) programme at RTI International India, recently published study report on India ‘s rooftop solar PV provides insight on the tardy pace of the installation of residential RTS PV in India and the need to move beyond the net metering concept.

She shared with Saur Energy the various challenges in the installation of residential RTS PV such as the lack of options in the financial models involved in the segment and the need to have connections based on RESCO model and other models such as zero export to increase demand from residential solar rooftop PV segment and boost it’s expansion. She said restricting residential rooftop solar PV growth upto the sanctioned capacity of households fails to push residential rooftop PV consumers to utilise their rooftop area for more solar power.

There needs to be more financial options for consumers to choose from to boost the residential rooftop solar PV. The report argues that RESCO-based DISCOM-driven demand aggregation can be beneficial to consumers and also help to increase the clean energy being fed to the grid. Incentivizing the residential rooftop solar PV segment and exploring other financial schemes can help to increase the installation of RRTS PV in India.

 

By-Manish Kumar, with inputs from Prasanna Singh