Urban Energy Transition: Scaling Up a Decentralised Electricity Future

Imagine an Indian city in 2040 - Sustainable and smart buildings that generate their own electricity, optimise their consumption, and seamlessly trade electricity with one another and with the grid; a cityscape outlined with rooftops with rows and rows of solar panels;  energy infrastructure offered as services to prosumers, rather than ownership, to ensure efficient upkeep and performance. All of this enabled by an agile regulatory environment that monitors millions of transactions every day and a grid that is intelligent, efficient, decarbonised, and decentralised.

This is the scale of transition we should aim for in Indian cities to truly decarbonise the country. As cities become the major demand centres, an alternative to the above will have devastating consequences for the planet. The increasing cooling demand and a transition to electric vehicles will further necessitate flexible and efficient distribution networks. In order to meet this demand sustainably and achieve large-scale decarbonisation of Indian cities, the energy transition needs to reach the grassroots – the urban consumers

However, the impact of the energy transition in India has been limited to the supply side. Since 2014, the installed capacity of large-scale solar and wind power plants has increased from 35.5 GW to 65.3 GW currently. However, rooftop solar – the most viable source of decentralised and clean power – has witnessed sluggish growth with capacity achievement of 4.3 GW. This will continue to be so until there is a demand-side drive for clean energy.

The current top-down approach has proven to be insufficient to drive this demand. Then, how do we take the energy transition to the end-consumers? How do we change India’s top-down ‘energiewende’ story to a bottom-up one?

Rooftop solar systems are one of the most suited clean technologies for urban built environment. Moreover, 82 per cent of India’s potential for the technology in urban areas is in the residential sector. However, uptake of the technology has been largely among industrial and commercial consumers. For residential consumers, installing rooftop solar systems possesses several challenges.   Lack of awareness regarding the technology, its benefits, processes, incentives, and trustworthy vendors is the main deterrent in rooftop solar adoption. Lack of awareness has also led to prevalence of poor-quality systems being installed which in turn has created negative sentiments among consumers. The high upfront capital requirement, lack of access to cheap finance, and access to suitable roof areas, are some of the other market challenges.

Given these issues, kicking off a massive demand for rooftop solar systems would need action in three directions.

Demand creation and aggregation through community mobilisation constitutes the first approach. Given the highly organised urban residential areas in India, residential society-based campaigns for behavioural change and awareness can lead to localised demand creation. Community-based demand aggregation campaigns such as Solarise campaigns in the United States, Solarise Dwarka in Delhi, and a demand aggregation campaign in Surat are successful examples of this. Benefits of such localised campaigns include increased collective awareness and positive attitude towards the technology, better bargaining power for the community for group procurement, and facilitation of community-based and shared business models. Local governments, discoms and civil society organisations should, therefore, take the lead in mobilising local communities through online and on-ground aggregation campaigns

The second approach is to develop new discom-led business interventions. As cities expand and grow vertically, a vast majority of consumers will be living on rent or in shared apartments. There are also consumers without access to sufficient upfront capital. The conventional business models – mostly capital expenditure (capex)-based for residential consumers –exclude access to a major proportion of residential consumers. However, there are several roles that discoms can play in the rooftop solar value chain that can open up the market to consumer categories that are currently excluded.

Discoms are better placed to be the aggregators for business models around shared systems. Shared systems are located within community premises and common roof areas, or elsewhere. Consumers share ownership or subscribe to purchase solar energy for shorter periods.  With such models, access to roof spaces no longer becomes the requisite for purchasing solar energy. Integrating solar systems to discom’s infrastructure and management systems through discom-led models will also provide greater flexibility and efficiency in grid operation, reduce peak demand, improve service quality, and facilitate better procurement planning.

Another crucial role discoms can play is in on-bill financing which can lead to implementation of renewable energy service company (RESCO) based models in the residential sector where monthly solar bills are collected along with utility bills, thus reducing payment default risk. Same can be applied for EMI-based models where the monthly loan repayment can be collected along with bills. Thus, financing rooftop solar system on the bill can help overcome the challenge of access to capital

Lastly, there is a need for a regulatory environment that can facilitate scale up and promote technological innovations. A recent analysis by the CEEW Centre for Energy Finance (CEF) on the net metering policies of Indian states has identified a wide range in the specifications for system capacity, grid integration, and compensation across states. A uniform and streamlined net-metering framework across states will enable standardisation of residential rooftop solar products. Virtual net-metering framework for shared systems, inclusion of rooftop solar systems in new building codes, and mainstreaming on-bill financing programs are some of the regulatory initiatives that can lead to faster scale up of the technology.

As inanimate systems begin to communicate with each other, the electricity paradigm would shift to a more decentralised one, and so will consumer behaviour. Urban micro grids, local energy markets, automated demand shifting, etc. could become the future norm. Extensive and timely frameworks for integrating such smart technologies are also needed to ensure a seamless transition to a decentralised distribution network.

Thus, dedicated community, business, and regulatory interventions for awareness creation, market creation, standardisation, and innovation can increase the demand among end-consumers for rooftop solar systems and pave the way for a consumer-led energy transition. Such a bottom-up approach is necessary to achieve India’s decarbonisation ambitions in a cost-effective and timely manner.