India can lead the way in distributed solar – GOGLA interview

pv magazine: What is the future potential for distributed solar products in India? What role can the private sector play?

Viraj Gada: India, with its huge population and diverse geography, needs a multitude of solutions to enable reliable, modern, universal energy access for all its citizens. Distributed standalone solar solutions are perfectly placed in aiding the Government of India’s efforts in providing 24×7 quality energy access to all. This was also seen in the Government’s Saubhagya scheme, where solar home systems were considered a viable solution for providing energy access to remote households.

Distributed standalone solar solutions can also play a big role in providing backup to the main grid, which is currently facing transition and distribution losses of more than 30% resulting in power cuts. The growing aspirations of consumers require innovative, decentralized, efficient solutions that can provide on-demand energy access.

Apart from household level energy access, distributed standalone solar solutions would also play a big role in supporting productive-use applications through efficient appliances, including solar pumps for agriculture, other solar-powered agri-processing machines and solar freezers for the refrigeration of produce.

India, with its huge local market and strong manufacturing capabilities, has the potential to become the global market leader for distributed standalone solar solutions by leading the way in technology, as well as business innovations in the sector. There is also massive potential for local manufacturing and exporting to the rest of the world.

According to a recent GOGLA supported study, the annual sales volume of distributed standalone solar products in India is Rs 38,594 million (US$ 576 million). This includes both government-driven (subsidy based) sales and private sales. The private driven segment is worth Rs 6,839 million (US$ 102 million), which is expected to grow at a rate of 8% over the next five years and has the potential to have an accelerated growth of 17% per annum. The value of this segment alone is 0.5% of the Indian consumer durable market.

The Government of India has committed Rs 1.75 billion for the setting up of the International Solar Alliance (ISA) and expects the Indian industry players to leverage the ISA platform to engage with the global market.

To what extent can the sector help India meet global climate commitments?

As per GOGLA’s January-June 2018 Global Semi-Annual Sales and Impact Data report, use of distributed standalone solar solutions globally has helped to avert 51 million metric tonnes of CO₂ and black carbon due to a reduction in kerosene use.

While this number is at a global level, India contributed to one-third of the global sales. Thus, it would be fair to attribute at least 33% of the impact to India.

What are the challenges facing the distributed standalone solar solutions market?

Some of the biggest challenges are lack of adequate awareness among policymakers as well as consumers, preference given only to the cost (and not the environmental factors) by Indian consumers, a government focus on traditional means of generation backed by heavy subsidies (which, in turn, is shifting the scales towards non-renewable sources of energy), and non-supportive taxation via import duties and GST. Also, there is a lack of globally harmonized standards and checks, which is leading to the infiltration of low quality products in the market and causing a negative perception of solar solutions in general in the minds of users.

Most of the distributed standalone solar products are either sold on an outright basis through financing, wherein the user owns the asset or they are sold via an innovative financing mechanism called pay-as-you-go, where the customer pays on the basis of consumption.

In the pay-as-you-go model, consumption is smartly measured by an in-built technology that shuts down the system once all the prepaid credits are used up by the consumer. This leads to a better awareness and understanding of financing in the users and avoids the issues of faulty readings via the meters and non-payment of dues by the users for a long time.

What’s the scope for pay-as-you-go model in India? How can this model be best optimized?

As consumers’ energy aspirations in India increase, they need larger appliances at home and more machinery at work, all of which increase the capital required for acquiring larger distributed standalone solar solutions. For most rural Indian households, availability of large capital at any one time is very difficult, due to periodical income cycles. This necessitates a solution that allows users to pay for their products in easy periodical instalments and, better still, on the basis of usage.

While microfinance institutions have solved the affordability issue for solar lanterns and solar lighting systems, these have a limitation on the loan size due to RBI regulations. Thus, a pay-as-you-go model is the need of the hour for the Indian market, as it allows consumers to pay small, easy instalments periodically with an option to pay on the basis of usage.

Given the deep penetration of the telecom industry across rural India, along with the progressively strengthening network, there is a strong case for the pay-as-you-go model in India. This model would need backing and support from telecom operators, along with mobile money wallet companies and other financial institutions.

Given India’s strong banking network penetration, pay-as-you-go could also work well in tandem with the different kinds of banks in India. So, all the ecosystem players need to come together to make this a success in India, as the product companies already have the technology and the proven business case from Africa.

Being a highly fragmented market in India, what opportunities does distributed solar offer manufacturers?

The distributed standalone solar sector has been facing issues of low-quality products flooding the market and creating a wrong consumer perception about these products overall through poor performance.There is a need for effective quality checks and standardization to enable the entry of high-quality global products into India and also open the pathway for Indian manufacturers to sell their products across global markets, where only global quality standards are accepted.

There are global quality standards like the upcoming IEC quality standards for decentralized solar products (IEC 62257-13-1) and IEC 62257-9-5 testing methods that need to be universally accepted and enforced by all governments.

What are your thoughts on consumer level subsidies in promoting the adoption?

The distributed standalone solar sector is still a very young and fast-growing sector that needs help from the government and other stakeholders. Efficient policies and incentives, like tax breaks and tax exemptions can go a long way in providing a positive boost to the sector. Instead of consumer level subsidies, for the long-term growth of the sector, there is a need for cheaper local currency financing mechanisms for companies and enabling policy support, which would eventually benefit the users.

The government is pushing the adoption of solar pumps in a big way. How equipped is the ecosystem?

India has already shown its potential for global leadership in the solar water pumping sector through strong government push and support. However, the country needs to indirectly support companies to boost and foster local innovations. We need start-up supporting policies, rather than consumer level subsidies, as the demand for solar water pumps has already been created and the only need is to provide consumers with innovative solutions. Better financing mechanisms and business models are required to ensure sustainable affordability options for the users.

Going forward, how do you see the evolution of distributed solar products?  

Manufacturers need to innovate both on the technology front to make larger solar powered systems (to cater to the rising energy aspirations of Indian households), and on the business model front to make the products easily available at the last mile through innovative affordable mechanisms.