When your achievement is 8-9% of your target, things are not quite all right. That is the reality of the rooftop solar business in India today. Against a target of 10,000 MW for March 31, 2018, the achievement as of the last day of 2017 was 923 MW.
While India’s track record in large-scale solar installations is respectable — the country had 16,070 MW by December-end, 2017 and is set to add another 6,500 MW by March — the rooftop part of the solar story has not been good.
Why it is so, is no mystery. For individual house owners, rooftop solar is still not an attractive alternative to the subsidised power supplied by the electricity distribution companies (discoms) — such as Tata Power Delhi Distribution Ltd. in Delhi, MSEDCL in Mumbai and BESCOM in Bengaluru.
As for others, such as shopping malls and factory buildings, they are the customers that the discoms — which are monopolies in the areas allotted to them — derive their sustenance from. So, the discoms find ways of preventing them from putting up rooftop solar plants and generating their own power.
Refusing surplus power
One of the effective ways has been to refuse to buy surplus power from the rooftop plants. As such, a factory that has roof space for 2 MW but can self-use only 1 MW, will restrict itself to its needs. Even the 1 MW may not be viable if any unutilised power or power generated on holidays is not sold. Since the rooftop plant owner cannot find a customer for off-and-on surplus power, he has to sell it only to the discoms — and the discoms are not buying.
Many states, like Tamil Nadu, disallow ‘net metering’, which measures the power put into the grid by the rooftop plants. Others impose a cap on the capacity allowed for net metering.
If the cap is, say, 1 MW, and if the shopping mall installs a 1.5 MW solar plant on its roof, only the 1 MW will be connected to a net-meter, which means all additional power would either need to be either self-consumed or unconsumed. “The most common challenge according to rooftop installers is the restriction of net-metering policies that put an upper ceiling of 1 MW on rooftop solar projects,” said Mercom India, a solar research and consulting firm.
“This is restricting the growth of rooftop according to many in the industry,” the note from the research firm added.
The government of India wants the country to have 100,000 MW of solar capacity by March 2022 — 60,000 MW from large plants and 40,000 MW from rooftops. It is not inconceivable that in the next four years the target of 60,000 MW would be achieved. However, the target for rooftop plants appears unattainable. At a time when the Secretary of the renewable energy ministry admits rooftop solar is going nowhere, the Ministry of Commerce has recommended safeguard duty of 70% on imported solar panels, a move that might cripple the entire solar industry, especially the rooftop segment.
Duly concerned, the government wants a new deal for rooftop solar. Last month, it put out a ‘concept note’ in this regard for public comments. The essence of the new proposals is to put the discoms in the driver’s seat, giving them incentives for rooftop solar capacity created by them in their operating areas. The government-owned SECI , a renewable energy facilitating company, would come out with tenders on behalf of interested discoms; the bidders who quote the least tariff will put up the rooftop plants and sell power to the discom.
The government would give the discom incentives, worth ₹23,450 crore, for rooftop capacities created. This, the Centre hopes, would propel the discoms to create an ‘enabling ecosystem’ for rooftop plants in their areas.
As many experts have pointed out, the idea of giving an incentive for capacity created is anachronistic. With an eye on the incentives, discoms would get cheap capacity installed, disregarding quality. Second, by offering discoms incentives for capacities ‘added by them, the proposed policy ignores a growing trend — the ‘opex model’. Energy companies put up plants on leased roofs and sell power directly to consumers.
“There is no provision for a third party developer like us,” said Manu Karan, vice president, Business Development, at the Warburg Pincus-backed solar energy company, CleanMax Solar.
Bias for size
Third, by selecting the rooftop plants only through competitive bidding, the proposed policy comes with a bias for large size.
A factory with roof space for 500 kW will be edged out because it cannot quote a price that is competitive with another energy company that might want to build a 5 MW unit. The proposed policy also leaves a lot to chance. What if the competitive bidding process does not discover a price attractive enough for the discom to buy? Such a scenario is not unlikely. In a tender for solar plants on the roofs of government-owned buildings with a subsidy of ₹1.5 crore a MW, the tariffs quoted were ₹4.17 a kWhr for plants in Tamil Nadu, ₹3.94 in A.P. and Gujarat, and ₹3.83 in Karnataka.
Remove the subsidy, the tariff goes up by a rupee. And this, for government-owned buildings, with little risk of property disputes.
Replicating GBI
The prices may not be attractive unless the discom passes on the incentives to the plant developer — which is effectively no different from the situation today. Will the discom use the incentives to create “an enabling ecosystem” or pass it on to the bidders to lower the prices?
A better approach would be generation-based incentives (GBI), say, ‘50 paise for every kWhr generated, perhaps capped at ₹1 lakh for a MW of capacity’.
A similar scheme served the wind industry well until it was scrapped last year. The GBI could be limited to, say, the first 10 years, by which time the firm would have serviced its debt. A suitably structured GBI would lower the prices for the discoms to be attracted to it.
The need of the hour is not to put the discoms in the driver’s seat, but to get them out of the way.
