Government of India has set an ambitious target of 175 GW of installed capacity of Renewable Energy
by 2022, comprising 100 GW of grid-connected solar power, of which 40 GW3 has been targeted for solar rooftop. Though India has made significant progress in implementation of utility-scale solar projects, achieving 40 GW of solar rooftop installations is still a substantial challenge. As on June 2020, installed capacity of solar rooftop systems was approximately 5.9 GW. The slow pace of solar PV rooftop installation can be attributed to various technical, policy & regulatory issues related to solar rooftop projects, as well as the need for better access to low cost financing and for more innovative & sustainable consumer-friendly business models. Thus, there is a need to bridge the vast gap between rooftop and ground-mounted installations, to enable fulfilment of national RE target. This would create a huge opportunity for private sector participation in the form of investments, business and technology
partnerships. This, in turn, requires assessment of the current challenges, benchmarking and lessons
from countries, which are at the forefront of rooftop solar sector and identification of areas of collaboration to increase rooftop solar project deployments in India.
Overview of Solar PV rooftop in India
Solar PV rooftop market in India has been aided by the policy & regulatory support. Different business
models as well as financing mechanisms have been tested in India to support the uptake of solar PV rooftop. However, despite various Government interventions there are certain associated challenges across different stakeholders that have been listed in this chapter.
Market evolution of solar PV rooftop in India
To promote solar rooftop, under the Jawaharlal Nehru National Solar Mission (JNNSM), the Grid-Connected Rooftop and Small Solar Power Plants Programme6 was launched to support deployment
of rooftop solar. The programme announced Central Financial Assistance (CFA) for the residential sector consumers (40% CFA for systems under 3 kW and 20% CFA for systems between 3 kW and 10 kW) for setting up 4000 MW of grid connected solar rooftop projects in the residential segment, with a budget outlay of INR 6,600 crore. Additionally, incentives were also announced for Distribution Companies (DISCOMs) for achievement in solar rooftop above their previous year baseline. The incentive was limited to an initial 18 GW rooftop solar capacity. Despite considerable decline in the cost of solar rooftop installations (attributed to the falling system costs and tariff discovery through competitive bidding mechanism) and the advantages which these systems provide, approximately 5.9 GW has been installed by the end of June 2020. The deployment rate needs to be accelerated to realize the national target of 40 GW by 2022.
In India, state of Madhya Pradesh (Madhya Pradesh Urja Vikas Nigam Ltd, the nodal agency) has tried this aggregator model by announcing a tender of 10.8MW capacity for industries located near Bhopal. Under this programme, 164 industrial beneficiaries would procure solar power from RESCOs. RESCO aggregated the demand from small, medium and large industries having different financial profile, contract demand, electricity consumption pattern and rooftop size. Based on aggregated demand, the developers had bid for the project for industries grouped under 3 packages of 3.6MW each. The tariffs discovered in this bid was quite low compared to the DisCom tariff charged to industrial consumers,
hence, bringing a cost-benefit advantage to industries without any upfront capital investment.
Overview of Solar PV rooftop in EU Drivers of solar PV rooftop growth in the EU
In 2019, the European Union experienced the biggest solar growth in the decade. Looking back at the EU’s solar PV market development, the first solar boom happened between 2008 and 2011, driven by feed-in-tariffs and favourable regulatory frameworks11 The subsequent years were a continuous process of adoption and adaptation of different support schemes, which were crucial to make solar a cost competitive technology.
Figure Installed capacity for rooftop PV in EU27 – in cumulative terms (left axis) and as a share of total
installed capacity (right axis).
As solar power becomes considerably cheaper than retail electricity in a growing number of European markets, on-site solar production is now more attractive for citizens and companies who previously could not afford such an investment. Following this trend there is a new set of emerging countries with booming solar markets such as Poland (see Figure 14), Hungary, and reawakening markets such as Spain16. Not only has solar PV become more cost-effective, but also some technologies that enable more bankable rooftop business models, such as batteries and smart appliances, are entering the market. In parallel, digital tools such as virtual power plants, data hubs and blockchain facilitate the integration of increasing shares of distributed small-scale renewables in the grid. In addition, a growing environmental consciousness in Europe is also contributing to the deployment of rooftop solar. A poll17 done around EU countries in 2019 revealed that nine in ten of surveyed citizens would agree with the statement that the EU should ‘encourage more investment in renewable energy, e.g. wind, solar to secure access to clean energy’.
Feed-in tariffs and Feed-in premiums
The Feed-in-tariff scheme was conceived to accelerate investment in renewable energy technologies, by remunerating, through a long-term contract (with a purchase obligation for around 20 years), fixed electricity prices to renewable energy producers for each unit of energy produced and injected into the electricity grid. Under the FiT scheme, most often, the producer injects all the electricity produced into
the grid; however, in some cases self-consumption is an option, in which case the purchase obligation
refers to the surplus electricity injected. When in addition to the wholesale price, the producers receive a premium price, it is referred to as Feed-in-premium scheme. Projects installed during the first boom of solar under the feed-in schemes will no longer have a guaranteed off-taker once the period of purchase obligation is finished. Those customers will eventually need to consider other sources of revenue for their solar projects, and for that purpose financing schemes such as leasing and aggregation projects will be an interesting alternative.
Innovative digital solutions
The dawn of a digital energy market brings great promise for solar rooftop PV. When coupled with or enabled by digital solutions, solar can become more flexible, profitable and inclusive. Flexibility can be achieved by smart energy management systems as well as decentralized storage options. It is estimated that the volume of controllable smart appliances in the EU by 2025 will be at least 60 GW, which could reduce peak demand by 10% .Digital platforms for energy data management and virtual control of distributed systems can become revenue sources once the utilities enable such services to be remunerated. Analysts have estimated that digital grids could lead to €810 billion in extra revenues for renewables between now and 2030. Additionally, consumers are able to become active participants of the grid, through smart meters, blockchain technology and smart EV charging systems, which can be incorporated in residential buildings and be remunerated by the grid for balancing services. Consumer
expectations are changing in all sectors including electricity. They want more choice and more comprehensive, seamless, intuitive, personalised, ethical and engaging services. Digital solutions
should, in fact, take into account their social impacts to ensure a just transition. The solar digitalisation process should be done in a way that the whole population can benefit from efficient, green and cheaper electricity.
Recommendations and way forward Business models in India are predominantly focused on CAPEX and RESCO models under net and gross metering connections. There is a need to increase investor interest in solar rooftop systems to enable fulfilment of national targets and possible lessons could be obtained from business models and initiatives to offer enabling environment in the EU. Progress could also be achieved in the areas of digitization and other new innovative models. Various lessons and recommendations identified in the report are set out in this chapter which include support schemes,
innovative financing mechanisms and digitization.
The Government of India, in the Union Budget 2015-16, announced an ambitious target of 175 GW of installed renewable capacity to be achieved by 2022, of which 40 GW capacity was targeted for solar PV rooftop. While the growth in the utility scale solar market has been significant, with 35 GW of installed capacity as on June 20201 rooftop solar growth has not been encouraging, with approximately 5.9 GW installed capacity achieved as of June 20202 Some of the major barriers inhibiting the growth are technical, policy and regulatory provisions, followed by lack of access to low cost financing and innovative & sustainable business models. However, there lies huge scope to tap this untapped potential for solar rooftop PV by gaining some experiences from the European Union (EU) market where different business models have gathered interest among consumers as well as concerned stakeholders, leading to increased uptake. This report focuses on the as-is-assessment of current business models prevalent in India, followed by an identification of key challenges in the sector. In addition to this, the
report covers some of the successful business models prevalent in the EU market that can be considered for replication in the Indian context to increase the solar rooftop PV uptake.