Power on the rooftops

The scheme must address structural problems too

The Union Cabinet’s approval last week for the Pradhan Mantri Surya Ghar Muft Bijli Yojana with an outlay of Rs 75,021 crore has the potential to change the dynamics of access to electricity and the country’s climate-change commitment. Under the scheme, the government will provide central assistance of up to 60 per cent of systems cost for 2 Kw systems and 40 per cent of additional cost for systems between 2 Kw and 3 Kw, the latter being the upper limit for assistance. Beneficiaries of the scheme, which is expected to cover 10 million households, will get up to 300 units of free electricity a month. The government said at current prices this would amount to a Rs 30,000 subsidy for a 1 Kw system, and up to Rs 78,000 for a 3 Kw system. Bolstered by an implementation plan that includes applying on a designated national portal, and appointing eight central public sector units to carry out the project, the new Surya Ghar project appears more robust than its predecessors. But the same issues that arose with the earlier plan could impact this one too, unless the government addresses these questions proactively.

Since the programme is demand-driven, requiring applications on a government portal, the question is whether households of the type the government is targeting — rural and/or poor — are likely to opt for it. Several renewable power companies have pointed out that the free electricity that states offer to these constituencies have acted as a deterrent to the adoption of rooftop solar systems. Unless states significantly review their power subsidies, a move that has long eluded reform for political reasons, this situation is unlikely to change. This apart, the free electricity component of the Surya Ghar programme assumes that these rooftop solar units are likely to be connected to the grid, which will also buy back excess power from households via the net metering system.

Two issues need to be addressed to make this work. The first is that the already cash-strapped state-owned distribution companies’ (discoms’) ability to absorb solar power is financially constrained. Many discoms anticipate losses from the net metering system since they already bear fixed costs on the operations as well as paying contracted charges to power generators under long-term power purchase agreements (PPAs). Many fear that paying consumers for absorbing power from their rooftop solar plants is likely to add to their costs, especially because it has to be absorbed during daylight hours, when tariffs tend to be higher. This leads to the second problem of pricing, which is complicated by the fact that solar tariffs have been plummeting on a regular basis, one reason discoms have been reluctant to sign PPAs with solar power generators.

These constraints may explain why the rooftop solar programme, which has been in operation since December 2015, has underperformed despite several adjustments to the incentive scheme. Until December 2023, the country had achieved a rooftop solar power installed capacity of just 11.08 Gw against a target of 40 Gw. Commercial and industrial consumers accounted for roughly 80 per cent of this capacity. Only a little over 600,000 households have adopted rooftop solar. Unless the government addresses the discoms’ structural problems of supply and pricing, it may find the target of 10 million households hard to achieve.