Policy flip flops, discoms hinder progress in solar rooftop projects

According to the industry data, close to 75 per cent of rooftop installations comes from the commercial and industrial segment

When the Central government revised the target for renewable energy installations in 2014, of the 100 Gw earmarked for solar power, 40 Gw was supposed to come from rooftop solar by 2022 and the balance from utility scale or ground-mounted solar projects.

Unlike developed nations such as Germany which pushed solar rooftop to improve public perceptions towards green energy, the government has been aggressively batting for utility scale.

So, while utility scale solar has seen immense progress with leading players lining up for projects, tariff spiralling down, and Central agencies pushing mega projects, rooftop solar has continued to remain a neglected sibling.

According to the data available on the website of the Ministry of New and Renewable Energy (MNRE), of the 40 Gw of installed solar capacity in the country, barely 4.4 Gw is rooftop solar, as of March 2021.

During 2020-21, against 3.5 Gw of utility scale solar, 1.9 Gw of rooftop solar was added.

According to the industry data, close to 75 per cent of rooftop installations comes from the commercial and industrial (C&I) segment. Other segments are residential and public places.

The sector saw a spurt in business when the targets were announced but the excitement has abated, mostly due to the lack of a push by the Centre.

“Industrial (solar rooftop) installations saw 50-60 per cent growth around 2014-15 till 2018. In the last two years, it has remained at 1-1.5 Gw annually, because of multiple factors including the pandemic. An initial push came from government schemes -- SECI (Solar Energy Corporation of India) bids, the mandate to have on-site solar in government buildings, public offices, etc. but this understandably has plateaued in certain states,” said Karan Chadha, head (business development), Fourth Partner Energy, a Hyderabad-based solar solutions company.

Chadha pointed out while many companies had begun adopting solar energy, one of the major challenges continued to be policy flip-flops, especially surrounding power distribution companies (discoms).

Industry executives point out rooftop solar was becoming attractive for several consumer segments when discoms and state governments started tightening regulations for the sector.

“The growth of the rooftop solar segment is very sensitive to the regulatory framework. The primary reason for slow growth has been the lack or withdrawal of state-level policy support for the rooftop solar segment, especially for the C&I segment, which forms most of the target consumer component for the rooftop segment,” Shriprakash Rai, senior director and head, C&I business, Amp Energy India.

Amp Energy is a Toronto-headquartered global energy transition platform backed by institutional capital partners, including most recently the Carlyle Group, which invested $374 million in 2020.

One major setback the sector faces is in net metering regulations. Net metering entails that excess power produced by a rooftop system is flowed back into the grid. The discoms pay the consumers for supplying this surplus power against the electricity bill they charge.

In its first draft of the Electricity Rights of Consumers Rules, 2020, the Union Ministry of Power mandated net metering for loads up to 10 kW and gross metering for loads greater than 10 kW.

The decision faced protest from the industry and Nitin Gadkari, minister of micro, small, and medium enterprises (MSME), who said the gross metering notification would crush the MSME segment and make renewable energy generation unviable for small players.

The power ministry revised the cap to 500 kw. The industry calls this arbitrary. At the same time, states do not always adhere to these regulations.

Kuldeep Jain, managing director, Cleanmax Solar, said the maximum net metering facility across the country was for 1 Mw per site.

“Even the biggest industrial facility has to be 1 Mw, irrespective of the client’s load. Many states it is 0.5 Mw. Some states do not even have net metering,” Jain said.

Sector executives point out that no discoms want to lose out their highest-paying consumers to solar rooftop. Most states do not allow rooftop systems above 1 Mw for the C&I segment even when their load is much higher. C&I customers are the most highly charged electricity consumers for a discom, which also levies cross-subsidy charges on them to recover giving free or low-cost electricity to other segments.

“The customer should be allowed to choose between net metering and gross metering. Moreover, the Central government has to play a more active role in not just in setting targets but measuring states against the same and drive some level of uniformity in policy,” said Chadha.

These policy fluctuations are also the reason why leading brands have stayed away from rooftop segment. Among large-scale players, only Tata Power has shown a significant interest in the rooftop solar business.

However, it has 5 per cent of the market share, according to Bridge to India. Tata is looking at expansion in the rooftop space as it shuns thermal business and goes green.

Industry is also hopeful that as corporations come under pressure to meet their ESG targets, a lot of them will embrace solar rooftop and allied decentralised solutions to meet their targets. Jain says, once the business and the value chain is linked to such green targets, it pushes even the smaller companies to adapt to such measures.

Chadha added, “Rooftop is the cheapest source of power for industrial consumers. It also helps tremendously in jobs creation, the ESG phenomenon is also providing a huge fillip to it. Three years back, customers asked questions about the area a rooftop solar system would cover, today they ask how much energy would be generated.”

Rai added that ease of financing, unrestricted net metering facilities and easy regulatory process should be in place to support the solar rooftop sector. “Public Financial Institutions and other key lenders could be issued a mandate to lend to rooftop segment. Also, existing lending lines with some of the banks could be made compatible with the challenges in the Indian rooftop segment, thereby making it more attractive for developers in this space,” he said.