Overview of Solar Rooftop Sector in India

India lies in the high solar insolation region, endowed with significant solar energy potential. The total solar power potential in the country, as estimated by National Institute of Solar Energy (NISE), is approximately 749 GW2 including solar rooftop. TERI has estimated that the realistic market potential for solar rooftop PV in urban settlements is about 124 GWp [1]. Central and the state governments have from time to time announced various policies for development of solar rooftop in the country. Under National Action Plan on Climate Change (NAPCC), the Government of India (GoI) had approved the Jawaharlal Nehru National Solar Mission (JNNSM) in January 2010, which paved way for the growth of solar capacity in the country. A target of 175 GW of installed capacity of renewable energy sources by 2022 was set including 100 GW of grid-connected solar power, comprising 60 GW utility-scale solar and 40 GW solar rooftop.

The institutional arrangement for implementation of the programme is clearly specified, both at the central as well as state level. At the central level, Ministry of New and Renewable Energy (MNRE) and Ministry of Power (MoP) of Government of India act as its nodal ministries. Solar Energy Corporation of India (SECI) has been constituted to act as the implementing agency for solar policy initiatives and plays a vital role in bridging the supply-demand gap in the market through diverse facilitation and support services. National Institute of Solar Energy (NISE), an autonomous institution of MNRE, was set up as a national R&D institution in the field of solar energy. Indian Renewable Energy Development Agency (IREDA) under the administrative control of MNRE, financially supports implementation of various policy initiatives by providing term loans for renewable energy projects. Central Electricity Authority (CEA) and Central Electricity Regulatory Commission (CERC) are key organizations that advice the government on technical and regulatory matters. At the state level, a similar institutional structure is present, with respective state energy/power departments as the nodal departments for the state governments. Various state energy development agencies are present to facilitate the implementation of policy initiatives at the state-level. The state electricity regulatory commissions (SERCs) act as the regulatory body at the state-level and look into the policy and regulatory matters respectively at the state level.

Institutional Arrangement for the Solar Rooftop Sector in India

For the promotion of solar rooftop under the JNNSM, Off-Grid and Decentralized Solar Application Scheme was launched in the mission’s 1st Phase during the 11th Plan Period. This phase of the scheme was focused on promotion of applications of solar energy to meet/ supplement power, heating and cooling requirements3. Under the 2nd phase of the scheme during the 12th Plan Period, the Grid Connected Rooftop and Small Solar Power Plants Programme4 was launched for the promotion of grid-connected solar rooftop, under the National Solar Mission (NSM).

Financial and Operational Aspects

Over the years, the initial cost of solar PV has reduced, but owing to the small size of the projects, upfront cost of installing solar rooftop systems continues to be high for majority of consumers. Although the economies of scale will bring down the costs of setting up of systems eventually, there is a need to attract financial investments to reach the target of 40 GW by 2022.One of the main hindrances in the growth of this sector that comes out from various studies is that Discoms are hesitant to promote solar rooftop in their license area as they perceive it as a threat to their revenue They anticipate substantive revenue loss from decreased energy ‘sales’ and the amount payable by them for any excess energy generated and injected into the grid. Though a few Discoms see solar rooftop as a profitable business case as it can help in meeting the demand locally, reduce transmission and distribution (T&D) losses and manage day time peaks.This can lead to optimized scheduling of power procurement from power stations or power exchange and thereby reduce their power purchase cost. Apart from the direct impact on the energy sales, the Discoms underlined other financial repercussions of implementing solar rooftop. Despite reduction in power procurement, the Discoms will still have to pay the fixed-charges to the generators, as the contracted power cannot be surrendered under their long term Power Purchase Agreements (PPAs). Discoms also mentioned that the state generating companies are not in a favour of reducing the power procured by the Discoms from them. Discoms, therefore, find solar rooftop implementation leading to unwanted revenue loss for them, especially with net-metered prosumers in their service-area.

New and Innovative Utility-Based Business Models

In the year 2018, with the help of Council of Energy, Environment and Water (CEEW) and support
from Shakti Sustainable Energy Foundation, BSES Yamuna Power Ltd. (BYPL) has developed three new innovative utility-based business models that can accelerate the deployment of solar rooftop systems in the residential sector [12], which are, namely:

  1. Utility-Led Community Solar Model (Suitable for consumers without roof access)
  2. On-Bill Financing Model (Suitable for consumers without access to credit)
  3. Solar Partners Model (Suitable for all residential consumers)

Deploying these models, the utility plans to charge a service fee from the consumers and developers, so as to mitigate any revenue loss from the solar rooftop and thus making it a viable business case for the utility. BYPL has requested Delhi Electricity Regulatory Commission (DERC) for their approval for a pilot project on these solar rooftop business models in order check the feasibility of each model for the Discom. The power electronics-based interface makes a solar PV system characteristically different in terms of the nature of generation. This is also a major reason behind a variety of technical impacts that a distribution system may experience with higher penetration of solar PV generation. The likely technical impacts of solar PV integration on a distribution feeder have been presented in the categorizing under various heads that indicate different aspects of a distribution system that are likely to be impacted with rising solar PV penetration.

Impacts of solar PV integration related to different aspects or parameters relevant for a distribution system

for PV modules and inverters, faulty systems maystill affect the distribution grid. Discoms suggested
that solar rooftop installations should be periodically checked to ensure that the generation injection is as per the set limits in the agreement and does not create power quality issues for the grid. Discoms were of the view that they may hire other agencies or outsource manpower for periodic check-ups of solar rooftop systems in their service areas as, they believe, thus, is very crucial for the safety of the distribution grid. However, one of the biggest challenges for carrying out regular inspections of the solar rooftop systems is that these systems being installed in consumer premises are beyond the reach of Discom’s authority and getting consent of the owner of the premises is a major task for the Discoms. Hence, quality check or monitoring of these systems becomes difficult. Discoms emphasized that solar rooftop capacity should not exceed contract demand and there should be a cap on the maximum-size of these systems that can be installed by each consumer category; primarily to ward off potential revenue loss due to increased injection of energy from solar rooftop systems into Discoms systems. Also, before installing solar rooftop, capacity of the distribution systems has to be checked and at times they may have to be upgraded so as to accommodate larger system sizes. Hence, capping of the solar rooftop system size is an amendment for the considerations in the regulations. Most regulations limit solar rooftop PV system sizes to be in the range of 1 kWp to 1 MWp . Although, the policies and regulations encourage self-consumption of solar power at the end use, regulations limit the system
size to 80–100 % of the facility connected load. Most state-regulations allow injection of solar power in
the grid limited to 15–30 % of the rated capacity of distribution transformer. However, a simulation- based study shows that PV penetration levels of 75% of distribution transformer capacity and higher can be implemented without having to undertake any measures to contain voltage problems or overloading This is significantly higher than the limits usually prescribed in the regulations (15–30% or higher
in few cases) in most of states today. Solar rooftop penetration level of the DT may be lower in weaker grids, or if additional free field PV power plants are connected. In addition, presently the section 4 (6) (a, b) of the CEA (Technical Standards for Connectivity of the Distributed Generation Resources) Regulations, 2013 as well as section 7 (3) of the CEA (Technical Standards for Connectivity of the Distributed Generation Resources) Amendment Regulations, 2019 mandate that the utility should undertake an inter-connection study to determine the maximum capacity of distributed generators at a particular location. Discoms were of the view that once the first check-point penetration limit of rated DT capacity suggested in the state net-metering regulations is reached, studies can be undertaken to determine maximum capacity for each DT in the Discom’s license area.

Overview of Findings

Discoms which are surplus in power find difficulties in absorbing additional solar power, as this leads to backing down of conventional power plants in the state and/or reduction in schedule from Inter-State Generating Stations (ISGS) with long-term PPAs having committed fixed charge liability. In case of CESC, Kolkata, they are even required to shut down their own conventional power plants in order to accommodate generation from solar rooftop PV.In hilly areas, the households being sparsely located, metering & billing of premises with solar rooftop systems as well as revenue collection become more challenging. In Manipur, the Discom has provided these consumers with pre-paid meters to avoid billing and collection expenses.Delhi, being a small land-locked state with high cost of land, solar rooftop becomes a natural choice/ option for increasing generation. Further, the daily day time peak demand profile for the Discoms broadly matches the generation profile of solar system. Thus, solar rooftop helps in shaving off peak demand, and therefore, becomes an optimum solution. Further, solar rooftop helps in deferring new distribution infrastructure, which assumes added importance in congested localities in the state.

Support for Discoms

Under the Phase II of Grid-Connected Rooftop Solar Programme11, focus of Government of India is an increased active involvement of Discoms with performance based incentives based on solar rooftop capacity achieved in a financial year.The State Governments may also revisit their existing programmes, policies & regulations, so as to encourage the distribution utilities to take lead role in implementation of solar rooftop. The SERCs could facilitate the same by specifying the role of distribution utilities in implementation of solar rooftop systems in the respective solar rooftop regulations.Addressing all the four aspects of solar rooftop is essential for accelerating uptake of solar rooftop by the Discoms. In view of diversity across Discoms, mainly in terms of consumer mix, solar insolation, Discoms may choose an appropriate implementation model. A review of solar rooftop policies and regulations at the state level taking note of the foregoing issues and challenges would facilitate acceleration in uptake of solar rooftop systems in a bid to achieve the target capacity set by MNRE for the year 2022.

Suggested Way Forward for Implementation of Solar Rooftop

The Government of India on 19th February, 2019 notified “Phase-II of Grid Connected Rooftop Solar Programme for achieving cumulative capacity of 40,000 MW from Rooftop Solar Projects by the year 2022”, with increased involvement of Discoms14. As per the new notification regarding the Cabinet approval of the Phase-II of Grid Connected Rooftop Solar Programme15, the CFA distribution has been restructured to provide financial support for setting up 4,000 MW under the residential category. It also seeks more active involvement of Discoms for the implementation of the said programme by making them the respective nodal points. More details of the new structure are awaited in the detailed scheme document.Performance-based incentives (only for initial capacity addition of 18,000 MW) will be provided to Discoms based on solar rooftop capacity achieved in a financial year over and above the base capacity (i.e., cumulative capacity achieved at the end of previous financial year) to help Discoms create an enabling ecosystem for efficient implementation of RTS programme in their area. Applicable cost is the applicable benchmark cost of MNRE for the state/UT for mid-range solar rooftop capacity of above 10 kW and up to 100 kW or lowest of the costs discovered in the tenders for that State/UT in that year, whichever is lower.

CFA as per new notification regarding Phase-II of Grid Connected Rooftop Solar Programme
Incentives for Discoms as per new notification regarding Phase-II of Grid Connected Rooftop Solar Programme
List of selected Discoms for interactions

Business Models for Solar Rooftop

Designing of appropriate business models has huge importance as it can help deployment of the solar rooftop systems as a viable business case for the stakeholders, which is one of the main drivers in its success. The ownership structures of the rooftop and the solar rooftop system are among of the most important parameters for designing a relevant revenue model for the stakeholders which forms the key to a successful model. Over generations, the business models deployed in this sector has restructured for the development of solar rooftop systems, as can be seen in the figure below.

First Generation of Business Model

Rooftop systems developed under the self-owned business model can either generate electricity for onsite consumption or for injecting into the grid. Based on the usage and connection to the grid, self-owned business model can be divided into:

1. Captive (off-grid) Under this type of sub-model, there is no connection between the grid and the rooftop systems. It is basically utilized for self-consumption for the consumer. Under this, it helps in either replacing the more costly diesel generators or providing grid quality electricity services, wherever absent.

2. Gross Metered The gross metered solar rooftop PV systems feed all the energy generated by them to the grid at feed-in tariff determined. It allows all consumer categories to participate in solar rooftop programme and earn a minimum rate of return on the investment.

3. Net Metered Under the net metering arrangement, the electricity generated is firstly used for the internal consumption and any surplus or deficit is maintained by the grid. The main value proposition is the difference between the consumer tariffs and the cost of solar energy generation from solar rooftop systems.

Utility-Based Business Models for Solar Rooftop Proposed by DUF Secretariat

Proposed Utility-Based Business Model based on Gross Metering Connection and Roof-Lease Arrangement

Second Generation of Business Model

The third party may rent rooftop from the rooftop owner and sell the generated power to the grid or to the rooftop owner through a PPA, or may also lease out the entire system to the rooftop owner who may utilize power from the system to replace utility-based power supply. Based on the agreement, the model can be categorized into various sub-models, namely:

1. Solar Leasing Under this sub-model, the system is leased to a rooftop owner who makes monthly lease payments as per the agreement for the consumption of the electricity generated by the solar rooftop system.The third party investor (lessor) earns steady cash flows in the form of lease payments on a month-to-month basis. The savings from the electricity generated by the rooftop system is a source of revenue for the rooftop owner.

2. Solar PPAs Instead of leasing, power purchase agreement can also be made between the rooftop owner and the system owner, based on the connection arrangement adopted for:

a. Gross Metered A part of revenue generated by exporting the generated electricity from the system to the grid is shared with the rooftop owner for providing its roof on lease to the system owner. The developer generates revenue by exporting the solar energy generated from the rooftop system to the utility at a tariff as per SERC. Roof lease is a source of revenue for the rooftop owner.

b. Net Metered The electricity generated by the system situated at the roof is used for meeting the internal consumption.

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