How new rooftop solar scheme will help boost capacity addition

The government has come out with many policies and reforms aiming at a 40 GW solar rooftop capacity target by 2022. However, the country has fallen short of meeting the goal with just 10 GW of rooftop capacity being installed by 2023. Of this, the residential rooftop category accounts for only close to 3 GW.

With the new scheme, the government aims to address the issues with rooftop solar capacity addition, including the high costs. The increase in subsidy for the modules to 60% from earlier 40% and provision of loan to households at a minimum rate of interest of 7% are expected to boost households’ ability to opt for a rooftop solar units.

“The government is easing the rules in terms of getting approval from discoms (for sale of surplus). It has also improved the financing options and aims to bring about awareness among households,” said Vikram V, Vice-President & Co-Group Head – Corporate Ratings, Icra.

As per a report by the Council on Energy, Environment and Water (CEEW), the country has a potential to deploy 637 GW of solar energy capacity on rooftops, and deploying just one-third of this total solar technical potential could support the entire electricity demand of India’s residential sector which is nearly 310 TWh (Terwatt hours).

However, the present lower levels of electricity consumption in most residential households reduces this technical potential to further 118 GW and then to further just 11 GW with no capital subsidy, as per the report. But with the government’s capital subsidy, the potential increases to 32 GW making the solar systems feasible for more consumers.

The government in 2015 had approved the Grid Connected Rooftop and Small Solar Power Plants Programme aiming at the installation of 4,200 MW rooftop solar plants in the country by 2019-20.

In the year 2017, the Centre then launched the programme with an increased budget of Rs 50,000 crore for rooftop solar projects by 2019-20. Realising its shortcomings, the renewable energy ministry again came up with a new notification asking distribution companies and its local offices to work as nodal points for its implementation.

Now, the new scheme has all the components altogether and analysts believe that the only challenge now remains is that of increasing awareness among consumers, availability of quality vendors, and implementation at the state level.

“The major challenges are the awareness among consumers, easing of approvals has to happen at state level, availability of quality developers and vendors to enable a successful implementation of the scheme,” Vikram said.

Solarising residential households also offers huge economic benefits to power distribution companies including reduced cross-subsidy burden, improved transmission and distribution losses, and lower average cost to serve consumers, as per report by CEEW.

“Their apprehension might be coming from the fact that they might lose consumption from the high paying consumers,” Vikram said. “Typically for 200-300 units, the tariffs are more at 6-7 rupees. For them (discoms), it is more advantageous to install rooftop energy.”

The benchmark cost of a rooftop solar system of size 1-2 kW is Rs 43,140 per kW as notified by the Ministry of New and Renewable Energy, applicable for general category states and UTs. The payback period of availed loan for rooftop solar installation is 5-6 years. The life of a module is 25 years and for 2-3 kW category, you can pay off the loan in 5-6 years, as per analysts.

Power minister RK Singh envisages the target of installing rooftop solar at 10 million households in two years. The country has a total residential rooftop solar capacity of 2.7 GW, according to government data with 0.67 milion households having a rooftop solar. Singh is confident that the number of 10 million households for installation of rooftop solar will further increase.

Moreover, the industry sees availability of domestic modules to improve by the latter half of FY25 under the second tranche of PLI (Production Linked Incentive) scheme for high efficiency solar PV modules rolled out by the government. This is expected to boost the implementation of the scheme.

“The first tranche of volume should come out by the end of December this year,” said Subrahmanyam Pulipaka, Chief Executive Officer of National Solar Energy Federation of India. “The supply of domestic modules in the market is expected to increase in the last quarter of FY25, giving a boost to RE capacity addition next fiscal compared to this year,” he said.

As per the government, manufacturing capacity totaling 7,400 MW is expected to become operational by October 2024, 16,800 MW capacity by April 2025 and 15,400 MW capacity by April 2026 under the scheme.

While the earlier attempts at increasing the rooftop solar installations failed, industry players are confident in the new framework and improved module supply that will increase the rooftop solar capacity of the country.