Rooftop solar has been the fastest growing sub-sector in clean energy lately, with a compound annual growth rate (CAGR) of 47% between 2016 and 2019. As of December 31, 2019, total installations in India’s commercial and industrial (C&I) rooftop solar segment reached about 3,966 MW, as per a report by The Institute for Energy Economics and Financial Analysis (Ieefa).
India has an ambitious target of achieving 40 GW of installed rooftop solar capacity by 2022. Currently, rooftop solar segment is lagging with total installations of 4.6 GW by the end of March 2020, which is way off the target of 40 GW by 2022.
With just 12% of the target achieved, the industry has been grappling with abolishment of net-metering policies across states. The Covid-19 pandemic added to the woes. The industry has suffered a significant setback in terms of project delays, shortage of labor, postponement of capex plans, uncertainty over import duty on panels, etc.
About 80% of the rooftop installations come from the C&I sector, which is slowly gaining demand as the country opens further in the fifth phase of Covid-prompted lockdown. Demand for residential rooftop solar power is also expected to grow as people look for alternatives to cut expenses and generate revenues.
The first half of this fiscal year saw rooftop solar installations severely impacted by the pandemic with a 50% fall compared to installations in H1 FY 2019. However, as the economy opens and businesses start resuming operations, many projects whose construction was ongoing or approved but delayed by the lockdowns will see commissioning in the third quarter.
The silver lining in this pandemic is the shift in consumers’ mindset. Consumers are now more focused on cost-cutting and have quickly adopted digital platforms such as Zoom/Microsoft Teams for conducting meetings.
India’s Fortune 100 companies will be leading the revival in demand for rooftop solar from the C&I segment. Their access to capital and ability to attract RESCO developers (capital expenditures covered by the installer) to provide power at attractive prices ensures that growth will continue to be sustainable.
Micro, small and medium enterprises (MSMEs) have been severely impacted by the pandemic and are actively looking at alternatives to cut down on power expenses. However, many are conserving cash and postponing their capital expenditure (CAPEX) to 2021. The operating expenditure (opex) model has become more difficult for this segment, as there has been considerable credit quality deterioration.
The year 2020 started with 330-360Wp poly modules and 370-390Wp mono modules. With a span of 6 months, we have seen 430-450Wp modules flooding the market and are expecting 540Wp–600Wp modules to enter Indian shores by May 2021.
The rapid increase in module power density has changed many industries’ outlook as much higher capacities are getting installed within the same area. Moreover, improvements in gain efficiencies are making solar power increasingly more attractive.
On the flipside, 330Wp poly modules have become extremely cheap and are readily available. Hence, developers and clients have been spoilt for more options and can customize as per their requirements.
Make in India policies
The Indo-Chinese relations have been frosty since the Galwan clash, and many consumers are now advocating the use of India-made modules for their projects. Moreover, the government has been continuing to stress its Make-in-India campaign.
However, policy measures continue to be short-sighted and may not deliver on the promise of attracting investments to develop the supply-chain infrastructure for solar module production. Safeguard duty has already been extended, and the basic customs duty might be applied as well. Together, these duties will raise the price of solar modules in the Indian market, making projects far more unviable and challenging to execute.
This year, many projects have already been delayed to a lack of clarity on the duties applicable. The uncertainty around basic customs duty has made bidding for projects a lot riskier as C&I consumers generally refrain from cost increases and eventually end up retendering the project.
Moreover, due to floods and fire incidents at major manufacturing sites in China, mono perc modules’ availability has considerably reduced, with most manufacturers unable to take new orders for delivery. Expected delivery dates for new orders have been pushed to January/February 2021, which will further affect the pace of installations in the second half of the year.
In 2019, the state government of Uttar Pradesh, Karnataka and Tamil Nadu withdrew their net-metering policies. The impact of the policy withdrawal has already been evident with a drop in rooftop solar installations across these states.
More states are likely to follow suit. The final nail in the coffin seems to be the Draft law for the rights of electricity consumers. The draft provides for net-metering only with loads up to 5 kW and gross-metering for loads above 5 kW.
Such a draft, if made into law, will encourage states to abolish net-metering. As a result, installation in more than 80% of the C&I market would become unviable until battery storage costs come down to INR 2 per kWh.
Battery storage is unlikely to become this cheap until 2024. Thus, during this period, the rooftop market would immensely suffer without the support of net-metering policies.
To sum up
It has been a rocky year full of challenges. The challenges have only become more difficult with the change in net-metering policies and frosty India-China relations. Resolution and clarity on these fronts are paramount going into 2021. Moreover, the availability of modules from China at reasonable prices will be important to monitor.
Rooftop installations will see a dramatic rebound if net-metering is allowed with its current caps of 1 MW and re-introduced in the states that have shifted to gross-metering. On the flip side, the government could consider providing a subsidy or incentive on battery storage usage, making these more affordable to consumers.
Navigating through the second half of FY2020-21 will not be easy. There are multiple variables in the form of availability and pricing changes from Chinese suppliers, frequent local lockdowns, and uncertainty over import duties and net-metering policies. Developers and installers that continue to focus on the RESCO model for C&I sector will see the fastest rebound in their business. Installers dependent on capex from consumers might witness a lag in recovery of orders.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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