India Falling Short in Meeting 2022 Rooftop Solar Target

By Madhur Singh

India has installed just 6 percent of the 40 gigawatts of rooftop solar power systems target it set in July 2015 to reach its overall renewables target of 145 gigawatts by 2022, putting the country on track to miss its goal by a wide margin.

Reaching this target would significantly reduce India’s reliance on coal and enable the country to fulfill its Paris Agreement commitment to reduce the carbon intensity of its gross domestic product by 33 to 35 percent from 2005 levels by 2030.

But consultants and utilities said policies are standing in the way, and a range of changes in subsidy disbursement, tariff structures, and net-metering allowances would ease doing business.

“The 2022 target is realistic provided realistic policy and investment are directed in the right manner,” Kanika Khanna, director of Sunkalp Energy, which connects rooftop owners with solar system installers, told Bloomberg Environment. “In India, the policy is being implemented in an ad hoc manner.”

The government needs to do more if it’s serious about the 40-gigawatt target, added Sanjeev Aggarwal, managing director and CEO of Amplus Solar, one of the largest rooftop solar installations companies in India.

“The industry is at an inflection point right now,” Aggarwal told Bloomberg Environment. “Rooftop solar is no longer a hard sell the way it was when we started four years ago.”

Subsidies Aren’t Enough

The earliest and most eager adopters of rooftop solar have been commercial and industrial users, accounting for 544 megawatts and 1,088 megawatts of capacity installation, respectively.

Further sweetening the deal for commercial and industrial customers are tax breaks, Vibhav Nuwal, director of REConnect, an energy consulting company, told Bloomberg Environment.

“So, for new factories, for example, it makes innate sense to go for rooftop solar,” Nuwal said, adding that many companies in the market such as Amplus Energy Solutions, CleanMax Solar, and Fourth Partner Energy that have raised funds and are going for rooftop solar “in a big way, including with OpEx models where they own the equipment and sell the power to the rooftop owner.”

The uptake has been quick among wealthy homeowners who pay higher tariffs. But for the vast majority of homeowners, the subsidized power tariffs are so low that the expense of installing solar equipment doesn’t make economic sense.

India incentivizes homeowners with a 30 percent subsidy for equipment costs, but the process is long and can take from four months to up to a year and a half. Installation businesses also said the subsidy comes too late due to bureaucratic red-tape.

“Getting money released for the subsidy is a nightmare,” Khanna said, citing the example of one client who applied for subsidy in August 2017 and is still waiting a year down the line. “For retail consumers, especially small residential ones, this is too long a wait.”

Businesses don’t want to get into the residential sector because the subsidy isn’t enough and are instead focusing on commercial and industrial rooftops, Aggarwal said. But here, too, “the government must make it easy for people to install rooftop systems.”

Utilities on Board

Commercial and industrial customers are constrained by other regulatory difficulties in addition to the many approvals needed. But perhaps the biggest factor holding back the rooftop solar segment is the reluctance of utilities to encourage it.

Because residential tariffs are subsidized, utilities impose higher tariffs on commercial and industrial customers to cross-subsidize home use of electricity. As a result, more large users switch to rooftop systems.

Utilities could gain from more users moving to rooftop systems thanks to reduced transmission and distribution losses. They can also use rooftop capacity installed in their license area towards offsetting their renewable energy purchase obligations.

But the benefits are offset by the downsides. Utilities face significant reduction in sales to large users who have switched to rooftop systems, making it difficult to recover their investment in building distribution infrastructure, according to a 2016 study.

Utilities also face problems managing variability, particularly when users inject solar power during off-peak periods and withdraw it during peak periods, often treating the utility grid as a backup power source, the study noted.

“In the current market framework, there is no incentive for [utilities] to participate in the rooftop solar sector,” said Vinay Rustagi, managing director of Bridge to India, a renewable energy consulting company in India.

To encourage utilities to support rooftop solar, they need financial and operational support, Rustagi told Bloomberg Environment, adding, “ideally, a role needs to be carved out for them as a service provider with a business model that compensates them for their efforts and loss of business.”

Trust Between Consumers, Utilities

The renewables ministry in December 2017 proposed to make utilities responsible for installing rooftop solar power plants in the residential sector while offering them a subsidy on installation costs as well as incentives based on capacity added.

Some utilities support this scheme, because they already have direct interface with the end user.

“There is a trust between the consumer and the utility that does not exist between the installer or the developer,” Jitendra Nalwaya, additional vice president at the private Delhi utility BSES Delhi, told Bloomberg Environment.

Utilities also stand to gain from making low-tariff paying residential consumers migrate to rooftop systems.

As per the scheme, utilities would take on all tasks involved in setting up rooftop systems. However, critics point out, a one-time subsidy is not enough of an incentive.