India has set an ambitious target — of achieving 175 GW installed renewable energy capacity by 2022.
Of this, 100 GW has to be achieved by solar energy, including 40 GW from small-scale, solar rooftop photovoltaic (PV) systems. This high share of 40 per cent indicates the government’s intention of developing this decentralised power generation segment.
What it means
Rooftop solar PV has the potential to provide many benefits to the Indian power network in terms of reducing overall transmission and distribution losses, ensuring better voltage regulation at grid tail-end, and, most importantly, allowing consumers to generate their own power.
This paradigm will pave the way for multiple small investments, eventually contributing to increasing the overall power generation capacity in the country.
The course taken by the Indian government is not very different from what has been followed globally. Major solar energy markets including Germany, Japan, the US and Australia, have a very high share of rooftop PV in their overall solar PV capacity, ranging from around 35 per cent in Japan to 75 per cent in Australia.
These countries have experienced smaller gestation periods of solar rooftop PV projects, when compared with large-scale utility ones. Therefore, the replication has been faster in this segment.
Ground reality
In India, the policy framework for both ground-mounted, and rooftop PV projects was laid together under Jawaharlal Nehru National Solar Mission in 2010. This emanated into Phase 1 for ground-mounted projects, and Rooftop PV and Small-Scale Generation Project (RPSSGP) schemes respectively.
However, the implementation of solar rooftop PV projects hasn’t matched that of ground-mounted solar PVs. The current installed capacity of solar rooftop PV systems is very low — at around 170 MW — when compared with that of ground-mounted systems, which have a capacity of around 7,000 MW.
The challenges
If the full potential of rooftop PV is to be harnessed, the challenges facing the segment need to be addressed. These include policy, regulatory, financing and implementation, encompassing the entire project lifecycle.
The initial policy, of keeping the buy-back price from both types of projects at par with each other (RPSSGP scheme of Ministry of New and Renewable Energy, and Indian Renewable Energy Development Agency Limited, and SERC specified same tariff for rooftop PV and ground mounted PV projects) has pushed investors’ interest towards large, ground-mounted solar PV ones — they expect to get better returns from them.
Thereafter, over-inclination towards net-metering regulations in the country further hampered the rate of its implementation, as this mechanism is more beneficial to commercial or industrial consumers than residential ones — retail electricity tariff of commercial consumers is higher than the cost of solar power.
In addition, they can also avail accelerated depreciation (AD) benefit. Thus, most installations in the country have come up in the commercial and industrial segment, leaving behind residential consumers or a segment that provides more roof space in India.
Additionally, small rooftop PV projects are largely ignored by lenders due to their small ticket sizes.
Government’s reply
The Indian government has started taking a number of steps to address these challenges and ensure continuous implementation of rooftop PV systems. These include providing capital subsidy to the residential segment; including rooftop PV in house loan or house renovation loan; including renewable energy in priority sector lending with a limit of ₹15 crore debt per project; encouraging small projects like rooftop PV; and issuing clear gross and net-metering policies/regulations.
As a result of these efforts, there has been a decent traction in implementation of projects. However, a strategy that addresses specific distribution licensee-related challenges still need to be devised and implemented carefully.
The licensee challenge
In the long term, rooftop PV will be economically beneficial to the entire society. However, distribution licensees may face operational and commercial challenges in the short-term, as their fixed costs are rarely recovered by the fixed component of retail tariff they charge from consumers.
Each unit of electricity not supplied to consumers due to power being supplied by solar rooftop PV system, will have an adverse impact on the distribution licensees — they will have to forego some part of their fixed cost, if not energy purchase, or variable cost. This could also be the reason why distribution licensees have been gradual in issuing detailed implementation processes and guidelines for approving and connecting solar rooftop PV systems.
Why we need them
Distribution licensees are critical to the development of solar rooftop PV, as they will be key institutions in providing approval for installation, electricity as well as balancing services and management of the overall grid. It is essential that they become main drivers of this programme and play the role of demand integration, coordination and implementation of projects.
It is important that some performance-enabling financial support be provided to them to accelerate the deployment of rooftop PV systems within their area of operation. The financial support to incentivise distribution licensee can be sought from National Clean Energy Fund (NCEF).
To sum up, it can be said that by taking distribution licensees on board and continuing to address other challenges, swift deployment of solar rooftop PV projects, while meeting set targets comfortably, is possible.
(Amit Kumar is a Partner, and Deepak Khetarpal is Manager of Energy and Utilities at PwC. Samay Mangalgiri, Senior Consultant, also contributed to the article. Views expressed are personal)