When Prime Minister Narendra Modi gave the country the audacious target of achieving 40 GW of rooftop solar installations by 2022, it was perceived to be the start of a new era in the energy landscape of the country. However, in the 5 years since then, rooftop solar installations have not picked up the pace being observed in the utility segment.
Today, India has over 20 GW of utility solar plants while rooftop solar installations stand just below 4 GW. Despite the industry reporting record installations for three years in a row, this growth has not met expectations. Lack of customer awareness, policy challenges, and lack of funding mechanisms shoulder much of the blame for this lackluster growth.
Despite all of this, however, the rooftop solar potential for India remains immense and it is only a matter of time before some of this potential begins to be realized. While the industry at large would hope that this is sooner rather than later, it depends on a number of factors.
Streamlining the Discoms
While the central government has been proactive in forming policies that will boost the adoption of solar power, there remains a huge gap in implementation due to the misalignment of electricity distribution companies (Discoms).
The way the industry is currently structured, when a large industry switches to solar, a Discom loses its most lucrative consumer. This has a huge impact on the bottom lines of our Discoms which are already struggling businesses.
This is the root cause behind the poor implementation of policies around the country resulting in very few states actually being able to seamlessly implement these policies. The recent debacle with payment delays by Discoms around the country simply shakes the confidence of the whole industry, whether rooftop or utility.
If we want to see Discoms being aligned to this mission of 40 GW, they need to be incentivized in one way or another to push for solar. Further, there needs to be more clarity on the long-term policy frameworks especially from the state governments. A unified portal that discusses the different aspects of different state government policies needs to be created and maintained by the Ministry of New and Renewable Energy.
Access to finance
World over, most of the solar has been put under the RESCO model (wherein capital expenditures are covered by the installer). This allows consumers to reap the benefits of solar power while not having to pay the high capital investments that are associated with these projects.
However, in India, the average credit profile is much lower than western markets. As a result, the possibilities change drastically with the customer’s credit profile.
While there are a lot of different options available to good credit-rated customers, there is a dearth of choice for consumers who either don’t have a rating or have one below the industry benchmarks. This has led to most of them not being able to install solar.
The debt financing options available through banks fail to inspire as well. To scale the industry faster, the country needs better financing options from national banks and non-banking finance companies.
Hopefully, as the industry matures and as financial institutions start understanding solar better, there will be an inflow of debt funding available for these projects.
Further, partnering with Discoms for payment collection and payment security can reduce the risks faced by project investors for RESCO projects and can thus help in funding the lower credit rating consumers.
Here is a startling fact—over one-third of all consumers who have installed solar on their roofs, both industrial and residential, would not recommend their vendors to their friends. The performance of these vendors left much to be desired. This lack of satisfaction of consumers has greatly hampered the growth potential of solar in India.
Companies need to adopt a customer-centric approach that is focused on creating delight for the end-user because when that happens, remarkable things are possible due to the network effects that are then set in motion.
The sharing of generation data from existing plants and making the same openly available for the public to access can prove to be a masterstroke for the industry. This will allow companies to perform in-depth analytics, something that is not possible for most companies today as they do not have access to a large quantity of data. By performing this analysis on generation data, engineering, procurement and construction (EPC) contractors and independent power producers can increase their service quality and make the entire operations and maintenance (O&M) process much more efficient, both for the consumers and themselves. They will be able to realize higher generations while reducing the costs of O&M.
Further, this data will provide all prospective consumers of rooftop solar to make more data-driven decisions and realize better returns from the project.
Most companies in the industry may express concerns with such a system; however, quality players will be forthcoming with their own data as it is the best testimony to the quality of their work.
Growth in the residential sector
Most residential customers who want to go for a solar plant can’t do so because of the lack of financing options and various hassles involved with the switch. The dream of 40 GW can never be achieved unless this sector opens up.
To achieve the desired growth, the residential sector requires standardization of the products, processes, and engineering by local EPC companies. Due to its very nature, the residential market will always be dominated by smaller players who will find it easier to provide services locally at much more reasonable price points than bigger players.
However, today, there are a limited number of quality local installers in the industry. In the midst of fly-by-night players, the genuinely good EPC companies also find it difficult to convince consumers on their performance.
In short, the country can recreate the residential market by developing the regional companies, providing better financing options (home improvement loans are just not good enough), and promoting standardization.
To sum up
As an industry, rooftop solar now needs to move to the next level. With growth stalling in many industries around the country, including rooftop solar, it is an opportunity for the industry to utilize this market downturn to become leaner and more efficient and find innovative solutions to the bottlenecks that have inhibited its growth thus far. Having done that, the rooftop solar sector will be able to rise high and shine in the coming years!
SafEarth online marketplace for renewable energy helps consumers in their procurement of rooftop solar plants. So far, it has helped over 100 industries in 8 states in India to buy over 30 MW of rooftop solar plants.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.