Encouraged by the tremendous response from the solar industry in terms of sheer volumes and a highly aggressive auction timeline which will see bids for 77-GW capacity by March 2020, the government is now confident of even “exceeding” the 2022 target of 100 GW. The optimism may not be entirely misplaced now that 34 solar parks with a total capacity of 20 GW have been approved and the generation target from mega solar projects doubled from 20 GW to 40 GW, but reaching the magic figure of 100 GW in another four years is easier said than done. While the 60-GW ground-mounted solar target is still achievable, though it will take some doing, it is rooftop solar which remains the stumbling block of India’s solar initiative. We have to make it click or the 100-GW target will turn out to be just a flight of fancy.
Out of the total installed solar capacity of 22 GW, rooftop solar accounts for less than 2 GW. In other words, the utility-scale segment has met more than 30 per cent of its 2022 target, but the rooftop segment has not even achieved 4 per cent. Rooftop solar will have to grow at a rate of 86 per cent every year for the next four years if we are to get any closer to the 40-GW target, an uphill task to say the least considering the woefully inadequate policy support. The Climate Group has projected that going by the present policy incentives, India will have 13.5-GW rooftop solar installations by 2022, which can go up to 26 GW with the right policy support, but 40 GW is evidently a pipedream. Leading global market analysts CRISIL and Bridge to India have also made similar observations.
Though the fastest-growing segment within India’s renewable energy sector, rooftop solar is still not growing fast enough, as ideally required to get to the elusive target. This is mainly because of lack of policy initiatives like net-metering and incentives for financial investors. Distributed generation may be the most challenging segment of the Indian solar sector, but it can potentially turn out to be the most rewarding in terms of sustainable market growth.
As a first step to ensure this, the government should develop the residential off-grid capacity through a robust regulatory and policy framework, which should include a remunerative net metering policy. We are yet to come out with uniform policies on net metering that allow users to sell surplus power to utilities. Unfortunately, neither the Centre nor the state governments have clarity about their net metering policies, which hold the key to the widespread adoption of rooftop solar across the country.
Compelled by the lack of net metering policies in the residential category, the Union government has downscaled its rooftop solar target for 2017-18 from 5,000 MW to 1,000 MW. Currently confined to industrial rooftop projects, the Ministry of New and Renewable Energy is still working on how to make this policy more attractive for users in the residential category. While commercial and industrial rooftop projects are already cost-effective without net metering, having effective net metering policies in place assumes critical importance for the residential category, where much of the daytime electricity remains unutilised. In what is acting as a deterrent for potential users in the residential domain, even states which allow net metering have imposed a cap on the amount of power that can be fed back into the state grid.
The implementation of policies presents the biggest challenge even when the guidelines are in place. For instance, 12 states and six union territories have still not put the distribution licence mechanism in place to streamline the procedures for grant of connectivity to rooftop solar plants. It may take applicants three-four months to receive grant of connectivity for residential rooftop solar systems. The system of approvals and clearances leaves a lot to be desired with multiple departments like regulatory commissions, state nodal agencies, discoms and urban local bodies made part of the process, which is causing inordinate delay. There is no reason why consumers, particularly those in the residential category, will not be inclined to save on their electricity bills by adopting rooftop solar, but the lack of awareness among them about the associated benefits and the cumbersome and time-consuming procedures for net metering approvals are proving to be a dampener.
Another major reason why rooftop solar is not becoming popular is that the current electricity tariff structure renders it an unviable option. This is largely in cases where power purchase agreements (PPAs) have been signed but not executed. State utilities and distribution companies across India are reluctant to adhere to PPAs as it could hurt their finances, especially in the wake of falling tariffs subsequent to the signing of PPAs. If more and more commercial and industrial users, who bring maximum revenue to state discoms, take to solar power, the revenues of electricity generators and distributors will fall. But discoms should only view it as a short-term problem since the cost of thermal and solar power is expected to reach parity soon.
One of the major challenges with rooftop solar is the variability in supply, the answer to which is development of effective storage technologies. As of now, storage solutions in India in the form of lead acid batteries are very expensive which only a few companies can afford. Most residential customers find the cost of installing both rooftop solar panels and storage facilities prohibitive. The next critical technology for solar in India is the development of more cost-effective and efficient batteries, which can store electricity when generation is at its peak and meet the requirements of users during peak demand hours. On their way to India, lithium-ion batteries can ideally serve this purpose and even help rooftop solar achieve economies of scale if the cost factor is taken care of through sheer volumes on one hand and development of indigenous storage technologies on the other.
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