Rooftop Solar Installations in India - What needs to be done to improve it

Background

India is endowed with vast solar energy potential. About 5,000 trillion kWh per year of energy is incident over India's land area. Solar photovoltaics power can effectively be used to tap this energy source.

Solar panel systems are generally categorized as residential, commercial & industrial, community solar, and utility-scale. Each of these different types of solar panel installations uses the same basic technology – a square-shaped semiconductor that is made from conductive materials such as silicon. When sunlight strikes these solar cells, it induces chemical reactions that release the electrons thus generating electric current. 

The area of interest for this paper is the residential rooftop solar panel.

The way the setup for works rooftop solar panels is when the consumer’s demand is lower than what the solar panel is generating, the system sends the excess electric power to the grid. The utility company bills the consumer only for the net electric power used (drawn from the grid minus what is sent back to the grid).

The Customer is now the PROducer as well as the conSUMER of electricity; he is now referred to as the PROSUMER.

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The system has below advantages:

1.   Protects the consumer from frequent blackouts – The majority of states in India still suffer from blackouts, either due to load shedding during peak demand periods or due to local distribution faults. The rooftop solar installation along with the Inverter protects the consumer from these blackouts.

2.   Clean Energy – Mass adoption of rooftop solar, can allow India to move away from the dominant source of electricity generation – fossil fuels. This helps achieves India’s latest target and commitments made at COP26 UN Climate Conference in 2021 - To raise the non-fossil fuel-based energy capacity of the country to 500 GW by 2030.

Commercial models

Let us understand the different commercial models that we have for the adoption of rooftop solar installations.

CAPEX: In the CAPEX model, the rooftop owner owns the project. This model requires the customer to spend upfront capital for buying and installing the equipment.

RESCO: Under the RESCO model, the Renewable Energy Service Company (“RESCO”) develops, installs, finances, maintains, and operates the rooftop solar project and supplies power generated from the Project to the consumer on whose premises the Project is set up ("Customer") or to the grid through net-metering.

India’s Solar targets and current position

By the end of 2022, India has a target to move 40 GW of electricity generation to rooftop solar power installations. As of mid 2022 we are way behind the target set.

Potential Causes

While the RESCO model offers the option to adopt solar power without the upfront capital investment, it has its share of disadvantages, which has probably caused slower adoption of solar rooftop adoptions in India. Let us look at some of the risks of the RESCO model:

1.   Long Term commitment – since the contract between RESCO and the customer is long-term, it requires a long-term commitment from both parties.

2.   Cheaper rates available later – With the advancement in technology and increased competition, the customer may feel bound because of the contract even when there are cheaper options available from other RESCOs later.

3.   Debt recovery risks for RESCOs – Since the customer needs to pay the RESCO for the electricity used, there are risks that RESCO runs into long-term debts when the customer is not able to pay for the electricity consumed.

4.   Cumbersome process – Due to the involvement of various stakeholders and approvals, the end-to-end process of getting agreements with RESCO/ utility and the customer, and update to the bill plan for the customer is cumbersome.

Possible Solutions

What is needed:

1.   Campaigns from government institutions/ utilities about the benefits of solar panels and increasing awareness about subsidies that are available to the customer.

2.   RESCO portability: Like the way it helped the telecom sector, allowing the customer to port to a new operator (in this case RESCO), gives the customer freedom to look for better and cheaper options. It also will help keep RESCO on its toes to provide top-notch service to retain customers.

3.   Common portal for RESCOs and Customers – Government bodies should look to provide a common portal for easier onboarding of customers and stakeholders to provide approvals to simplify the workflow.

4.   Roping in Fintechs for new-age business models to fund the projects.