With rapid fall in solar prices and steady increase in cost of conventional power driven by fuel shortages, a recent study has observed that rooftop market for customer segments that are already seeing parity with utility tariff has the potential to be a game-changer in the coming five years.
The latest KPMG report — The Rising Sun — points out that the already narrow grid parity between solar and conventional power will become even narrower in India by 2017. The report focuses on the solar cost trends and looks at segments of the market which are most suitable for adoption of solar power within the coming years.
“Given the issues of fuel shortages and import dependence of the energy sector, solar power should be given a significant strategic thrust by the government. The National Solar Mission (NSM) has made a good beginning. The momentum should be sustained if the investments made by the country in the last few years are to give the full benefit,” Arvind Mahajan, partner and head of Energy and Natural Resources vertical at KPMG in India, said.
Mr. Mahajan added that the State governments, utilities and regulators should encourage solar power to realise its potential by providing critical enablers such as net metering infrastructure, energy banking facility and developing an ecosystem for rooftop market installation.
India’s solar capacity has grown from less than 20 MW to more than 1,000 MW in the last two years. KPMG is of the view that this initiative should be addressed by supporting solar power in the next five years to nurture the ‘green shoots’ that have emerged in the ecosystem and set the platform for solar power to play an important role in meeting the energy security and clean energy considerations of India. The government should keep the momentum going by providing sufficient clarity on the market, announcing the next phase of the NSM quickly and addressing some regulatory issues which can open up the private contracts market.
“Solar power technology can help India leapfrog in the energy sector as we are in a unique position in time when solar power costs are becoming competitive with alternate sources at a time when our energy requirement is going to grow two times over the next decade. The analogy is similar to what happened in the telecoms sector where cellular technology helped us rapidly meet our demand for communication services,’’ according to Santosh Kamath, partner, KPMG in India.
Leasing solutions can help accelerate this market. For example, a high-end residential consumer can install a 1 KW solar PV system — to reduce marginal power consumption — with a monthly EMI payment of around Rs. 2,000 for five years and avoid an average discounted monthly payment of around Rs. 1,200 over the lifetime (12 years) to the grid. Similarly, a ten year EMI would result in an outgo of only Rs. 1,200 per month equal to the average discounted power cost savings over the 25 year lifetime of the asset.
