Distributed Solar Power Generation - “Small is the New Big”

Industry Insights
Typography

Indian Renewable energy sector got a major boost when the Government of India revised the National Solar Mission target of Grid Connected Solar Power projects from 20 GW to 100 GW by 2022, which is the world’s largest Renewable Energy expansion programme.

The same is sought to be achieved through rooftop/distributed solar projects (40 GW) and Ground mounted/ Utility scale solar projects (60 GW). 

There is a splendid growth in the Solar energy market, Solar Power Projects Commissioned in India have increased by more than 370% in the previous 3 years from 2.6 GW to more than 13 GW in 2017 (as on 31.07.2017 the cumulative Solar Energy capacity installed is 13.6 GW). Out of this India has added 678 MW of rooftop solar capacity in FY 2016-17, growing at 81% Y-o-Y. 

Total installed rooftop solar capacity reached 1.4 GW as of March 2017. In the first half of 2017, large-scale solar installations made up 4,290 MW (90 per cent) and rooftop installations totalled 475 MW (10 percent) of the total. 

Commercial and Industrial (C&I) customers remain the biggest market segment in rooftop solar sector with 65% of total installed capacity (910 MWp), as economic viability is most pronounced for such customers because of factors like Accelerated Depreciation, Projects being offered under OPEX model and Energy savings of more than 50% (considering currently grid tariffs in this segment are typically between INR 7-10 and rooftop Solar OPEX tariff to be INR 3.5 - 4.5). 

C&I segment is followed by Residential with an Installed capacity of 304 MWp (22%) and by public sector with 189 MWp (13%). The public-sector segment is expected to show robust growth in coming years because of the strong government push, combined with incentives. 

The rooftop/distributed solar market is finally beginning to realise its potential, factors which are the backbone of this growth story are

  • Central and State Governments offering subsidy of about 30% of the project cost.
  • Solar Energy Corporation of India (SECI) floating phase wise Tenders for rooftop Solar Power Projects, for Government Buildings with Incentives in FY 2017-18 and for Institutions/Colleges/ Non-profit Organisations etc with 30% Subsidy in FY 2016-17.
  • Tax Benefits for Commercial & Industrial customers, because 40% Accelerated Depreciation could be claimed in the first year itself.
  • Net (or) Gross Metering offered by almost all States.
  • Decline in EPC prices for rooftop/distributed solar by more than 30% from Q1 2015 to Q1 2017. 
  • Rooftop/Distributed Solar Plants are more Energy Efficient as there are minimal energy losses when compared to Utility scale projects

In the rooftop/Distributed solar segment, in FY 2017 capacity addition expected is 1 GW and might scale up to over 2 GW by 2019 and over 3 GW by 2020. Therefore, Distributed Solar Power Generation market in India will be apt to be termed as “Small is the new Big” as they present an attractive growth opportunity along with strong growth trajectory for years to come because of strong market fundamentals, lucrative policies from the Government, falling costs and improved debt financing.

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