The government of India in 2014 revised the national solar
installation target from 22 GW to an aggressive 100 GW by 2022. The target was
split between large-scale solar (60 GW) and distributed solar (40 GW). Though
large-scale is seeing exponential growth year-over-year, distributed solar
largely consisting of rooftop and ground-mounted captive projects of up to 1 MW
has lagged with just over 600 MW installed as of December 2016.
The sector currently faces several challenges and
bottlenecks which must be removed to achieve the necessary growth for the rooftop
sector to take off.
Apart from regulatory issues, other challenges facing the sector
include lack of awareness among consumers, high upfront costs, and lack of consistent
policy support from the states.
While over 20 states have some net-metering policy, very few
states have demonstrated functioning net-metering programs. In tandem with the
Ministry of New and Renewable Energy's (MNRE’s) 40 GW goal, most states have
announced rooftop targets to reflect those goals, but few are executing on a serious
plan to achieve these targets.
The poor financial health of power distribution companies (DISCOMs), have contributed to an
unwillingness to actively subsidize rooftop installations knowing that DISCOMs will
lose their most important customers and revenue, putting them into a deeper
hole. Accelerated depreciation (AD) rates will come down from the current 80
percent to 40 percent starting April 1, 2017, making things tougher. The
10-year income tax holiday under section 80-IA was not reinstated in the recent
budget and will end on March 31, 2017.
In a recently held MNRE review meeting, many states flagged
the issue that 30 percent subsidy currently available is only for individuals
and institutions registered under society act and NGOs, and no subsidy is
provided for government buildings except for a few incentives.
Regulatory actions need to be taken by states and union
territories to ensure uniformity in maximum allowed rooftop solar (RTS) capacity with respect
to sanctioned load, exemption from Certificate of Employment Intermediaries (CEI)
for small RTS systems, net/gross metering regulations, and mandatory solar
Installers are reluctant to participate in the rooftop
market as policies and their implementation is not consistent in all states and
consumer participation has not been up to expected levels.
Securing project financing has been a challenge as banks are
not sure whether rooftop solar is financially viable at current quoted
metering is not that difficult to implement,” said a
source at Vivaan Solar. “All it
requires is coordination between the state electricity regulatory commissions,
DISCOMs and state nodal agencies.” A lack of working net-metering policies and
their implementation is a major hurdle for the sector, added another developer.
The sector is facing skepticism from government bodies due
to the high cost of energy generated from rooftop solar systems, stated a
source at Madhav Infra. The poor condition of DISCOMs aggravates
the situation as they are not willing to install costly, net-metering systems,
added the source at Madhav Infra.
In a developing country, affordability in residential sector
is much lower than in developed countries. People are less aware of government
policies and the available incentives, stated Mercom’s source at Rays Expert.
The government should help by setting up consumer awareness
and guidance centers to educate on the placement and functioning of meters,
processes for metering and interconnection with the grid as well as
maintenance, stated another developer.
Funding an initiative like 40 GW of rooftop by 2022 is a challenge,
given India's inadequate financing capabilities. Even the finance ministry has
explicitly raised concerns about funding such ambitious programs; the
government should facilitate easy financing in the sector, stated a source at
Rooftop land allotment and power purchase agreement (PPA)
signing are long complicated procedures which lead to delays in project
commissioning, stated the source at Rays Experts. If higher renewable purchase obligations are
set for rooftop solar, it will push the sector in a positive way, added the
industry can get to 40 GW in rooftop solar only if favorable tax regimes and
policy regimes are enforced strictly. Many state electricity agencies and
DISCOMs do not have strict timelines or monitoring of timelines to install net
meters once the application have been submitted and if they do, they aren’t strictly enforced. This leads to a
lot of back and forth and eventual discouragement for investors. Some states
still have backward net metering policies like Tamil Nadu which restricts net metering to the highest
consumers of power, industrial and institutional customers. Since
commercial and industrial establishments have already reached grid parity in
multiple states, the will to enforce integration into the grid is the missing
ingredient to accelerating rooftop solar success at this point in time,” stated Mercom’s source at SolarTown.
To promote rooftop solar, Rs.50
billion (~$734.37 million) has been approved for implementation of
grid-connected rooftops systems up to 2019-20.
In May 2016, the World Bank approved a $625
million (~Rs.42.01 billion) loan to support the Government of India’s program to generate electricity
from widespread installation of rooftop solar PV. The Board also approved a co-financing loan of $120
million (~Rs.8.06 billion) on concessional terms and a $5 million (~Rs.336.11 million) grant from Climate
Investment Fund’s (CIF) Clean Technology
Further, the World Bank approved
a grant of $22.93
million (~Rs.1.55 billion) to enhance installed capacity of grid-connected solar
rooftop and strengthen the capacity of relevant institutions for widespread
installation across India.
To provide necessary financing for development of rooftop
solar projects, the Government of India and the Overseas Private Investment
Corporation (OPIC), the U.S. government’s
development finance institution, launched the US-India Clean Energy Finance
(USICEF) Facility Initiative with $20
million (~Rs.1.36 billion) in June 2016.
In June 2016, the U.S.-India Catalytic Solar Finance Program
(CSFP) was launched to raise $40 million (~Rs.2.69 billion) from U.S. foundations and the Government
of India. The fund will be utilized to invest in India’s solar sector with a focus on off-grid and rooftop solar.
The CSFP is expected to mobilize close to a billion dollars in capital.
In the special category states and union territories of
Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Lakshadweep and
North Eastern states, central
financial assistance (CFA) is provided for up to 70 percent of solar project
costs. For general category states, CFA provided is 30 percent.
Through soft loans and tax credits, the government is trying
to boost growth in the sector, stated an MNRE official. The UDAY program (Ujwal
DISCOM Assurance Yojana) has covered over 90 percent of DISCOM debt so DISCOMs
will be more willing to invest in net-metering systems and the solar rooftop
sector, added the MNRE official.
The MNRE and state nodal agencies have been providing
subsidies and incentives to help the sector grow. Recently, the MNRE announced
incentives for DISCOMs to the tune of Rs.3.75 million (~$55,078)/MW to support
will empower the DISCOM to focus on rooftop solar as the incentive/MW is very
attractive,” stated an official at
Uttarakhand Power Corporation (UPCL).
not able to implement policies and programs on time and as expected, as we are
financially tied down,” stated
an official at Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company.
When asked about the deadline for the end of subsidies such
as Tax Holiday and 80 percent accelerated depreciation, and incentive program
coming near, an MNRE official said, “Reviews
are done to provide subsidies and incentives for each fiscal period. There is
no need to panic as after reviewing, a new target will be set and incentives
and subsidies will be announced for targeted capacity. In some states the
subsidies can be more than in others,” stated
the MNRE official.
The MNRE official also added that the Ministry of Finance
has issued an advisory to all public-sector banks to encourage home loan and
home improvement loan seekers to install solar rooftop systems and include the
cost of such equipment in their home loan proposals.
MNRE thinks there is a need to change the current assistance program,
implementation will be done keeping in mind the requirements of the sector,” stated the MNRE official, when asked
about the changing incentives.
For solar rooftop to grow, policies have to be made keeping
in mind the dissimilarities between rooftop solar and utility-scale solar. Government
policies should encourage power generation through rooftop systems at the point
of consumption rather than only providing capital subsidies.
One approach could be to provide generation-based incentives
for end-users including household segments which can drive growth of rooftop
without putting additional burdens on distribution and transmission
infrastructure, while at the same time achieving targets for renewable energy
installations, stated Mercom’s
source at Rays Experts.
government should also remove bottlenecks to getting clearances, certifications
and subsidies as delays lead project commissioning delays which ultimately
leaves a sour taste with installer that lose more than expected,” commented Mercom’s source at Hero Future Energies.
According to Mercom’s India Solar Project Tracker, as of
December 2016, 605 MW of rooftop solar has been installed. In 2016, SECI
MW and tendered 1,000
MW of rooftop solar. A total of 3,044 MW of rooftop solar was approved by
Indian states will have to implement policy changes through
nodal agencies to achieve rooftop targets. All states will have to show a
conscious effort; for this to happen MNRE must facilitate ease of constructing
and commissioning rooftop systems.
100 GW by 2022 is the primary goal of the government; whether rooftop makes up
40 GW of it is secondary. Every country is different and the markets will
eventually decide where the opportunities lie and move towards installations
which offer the most returns with the least amount of risk. It will not be
considered a failure if India comes close to achieving 100 GW by 2022 with
rooftop making up only 10-15 GW. The policy makers should not dilute their
efforts by trying to put together a patchwork of incentives and subsidies which
will eventually be ineffective and instead focus on areas that are working - like
large-scale projects - and make it better. The states will not go against their
own financial interests and many feel that they are being pulled from one
direction to another and unable to focus and execute on any,” commented Raj Prabhu, CEO and
Co-Founder of Mercom Capital Group. “The government
cannot take away the most important incentives and expect to reach these aggressive
goals - that is counterintuitive. The goal of current subsidies/incentive structure
for rooftop solar seems to be minimizing subsidy costs to the government and is
not structured to spur growth,” further stated Prabhu.