RTS has the potential to contribute significantly to mitigation and has strong linkages to the local economy, but state governments and distribution utilities are not supportive of RTS.
By Dhruba Purkayastha
India’s policy and implementation efforts for renewable energy have been globally acknowledged. India is to have 100GW installed capacity in solar by 2022, of which 60GW is expected to be attained from utility scale, and 40GW from rooftop solar (RTS). As of June 2019, installed capacity for solar is 30GW—and RTS accounts for 4GW, owing to recent growth in installations.
This limited growth in RTS has thrown up concerns with discoms losing revenues from higher tariff slabs for commercial and industrial consumers. Now, many RTS developers and EPC players have shut shop as amidst these concerns their business models don’t seem viable.
RTS has the potential to contribute significantly to mitigation and has strong linkages to the local economy, but state governments and distribution utilities are not supportive of RTS. This is surprising, given the inherent benefits of RTS, and various policy and regulatory initiatives (including subsidies) that had been undertaken by the ministry of new and renewable energy (MNRE). These projects lead to savings in ATC losses, reduction in GHG emissions, lower water and land requirement as compared to utility scale solar. RTS has found a place in the Drawdown’s list of top-ten GHG-mitigation technologies. Also, RTS is beneficial for distribution utility in terms of net margins, even when there is loss of revenue from reduction in sale of units. Both globally and in India, RTS programmes have been driven by incentives in the form of direct capital subsidy, tax credits, net metering and Renewable Power Obligations. But now some state governments and regulators are constraining deployment of RTS by imposing a variety of restrictions, such as capping—it translates into a reduction to a certain percentage at the local level (distribution transformer) load, and as a percentage of connected load per customer.
While almost all states have allowed net metering, here also distribution utilities are creating problems. Discoms have been expressing concern around loss of revenues from high-tariff paying consumers, like when Open Access was allowed for third-party power purchase for large industrial consumers.
RTS deployment has been supported by technical assistance and concessionary lending from the World Bank and ADB through PSBs. These have not been adequately used. RTS deployment follows either capex or opex (Renewable Energy Service Company) models. In capex, the system is owned by the electricity user/RTS owner, whereas in opex the third-party solar power developer enters into long-term PPA. Currently, more than 70% of RTS (as per BTI report) is in commercial and industrial segments and limited to corporate-owned buildings. Interestingly, government tenders for state-owned buildings have seen limited success for lack of financing. The reasons for lack of bank financing for RTS include lack of credit information on off-takers, irrational reliance on credit ratings and financial institutions often prescribed by the government and regulators, and lack of credit to MSMEs. While the MSME sector can deploy RTS to the tune of 18-20MW, the deployment has been minuscule. However, with policy regulatory and institutional constraints increasing in RTS, simply enabling finance would not go a long way in increasing RTS deployment.
MNRE has now announced a scheme called the SHRISTI (Sustainable Rooftop Implementation for Solar Transfiguration of India), which aims to bring discoms at the forefront for deployment of RTS and achieve the 40GW policy target. SHRISTI incentivises discoms in relation to installed capacity of RTS in their area ranging from 5-15% of capital cost, and Rs 11,000 crore has been allocated. But the scheme doesn’t outline implementation methods. Studies from Shakti Foundation and CEEW have shown that it is possible for discoms to benefit from RTS. In the case of Delhi, these have aggressively promoted and adopted RTS. However, most state-owned discoms are yet to figure out the benefits of RTS, and are too focused on revenue/cross-subsidy losses.
Given the transformative potential of RTS supported by improving technologies and falling prices of solar electricity generation and battery storage, it is imperative that state governments and discoms engage positively with market players. This would support India’s clean energy targets and also create a widely distributed entrepreneurial ecosystem, especially when solar energy can create the largest number of jobs per unit of investment in energy, as reported by the International Renewable Energy Agency (bit.ly/2IbeB97).
The author is director, Climate Policy Initiative, a Delhi and US-based analysis organisation.