Is Residential Rooftop Solar Ready to Take Off Post Subsidy and Falling Equipment Costs?

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Annual installation of residential rooftop solar has declined from 199 MW in FY 2017 to 93 MW in FY 2020 despite attractive subsidy and falling equipment cost. Lack of consumer awareness, limited rooftop space and shortage of financing options are the main cause of this fall. However the increased power consumption in the residential segment, highly affordable and financially attractive schemes, falling prices. low EPC cost, remote site surveys and standard designs for reduced installation time etc will help take off the residential rooftop market. MNRE has already sanctioned the subsidy of 833 MW. Overall there is great optimism about prospects and the residential rooftop solar market should grow rapidly in the coming years

Let’s read experts view

Rooftop Solar in India has been seeing a steady adoption, evident from the rising capacity addition every year. According to a Bridge to India report, India’s total commissioned rooftop solar capacity stood at 6130 MW as on September 2020, predominantly driven by the Commercial and Industrial segment. The Residential segment, which is in the nascent stage stands at 804 MW, which is approximately 14% of the total of 5880 MW of Rooftop Solar as of June 2020. However, with the changes in policy and business environment, the residential segment is poised to pick up the pace and is anticipated to have a significant share in the coming years.  

The Ministry of New and Renewable Energy (MNRE) in 2019 launched the Phase-2 of Grid Connected Rooftop Solar Programme in which the Central Financial Assistance (CFA), or in other words subsidy, was accorded to the Residential sector. Phase-2 of the programme had revised the subsidy limits for individual residential houses to 40% for capacity up to 3 kW and 20% for capacity between 3kW to 10kW. The subsidy is based on either the benchmark cost mandated by the MNRE, or the discovered price in the tender, whichever is lower. The subsidy allows the homeowners to significantly reduce their share of the price paid for the rooftop solar system making it more affordable. 

Charukesh N R B, Manager, Residential Solar, HomeScape by Amplus Solar

Residential Solar—Thinking beyond Capital Subsidies and Lower Equipment Costs

The Sustainable Rooftop Implementation for Solar Transfiguration of India (SRISTI) scheme was announced in early 2019. It was expected to rejuvenate the rooftop photovoltaic (RTPV) sector, which by then had achieved only ~1.2 GW of the 40 GW target for 2021–22. SRISTI targeted the underserved residential category by offering attractive capital subsidies of up to 40% for 1–3 kW systems and 20% for 3–10 kW ones. The scheme also had a subsidy component of 20% for large apartment complexes and group housing societies.

Despite this scheme and falling equipment costs, the residential category continues to underperform, currently accounting for only ~1 GW (total: ~6.1 GW). The primary reason behind this tepid growth is the lack of information available to prospective consumers. 

This information gap can be addressed through awareness programmes that can communicate the immense financial benefits of RTPV. A typical 5 kW system costs around INR 1.7 lakhs with a payback period of less than 4 years. The return on investment is approximately 650% under net metering over the 25 years lifetime of the system. RTPV yields savings through reduced electricity bills with tax-free returns, thereby making it a unique investment opportunity. When communicated adequately, these benefits will resonate with the public, helping them make informed investment decisions.

Saptak Ghosh, Research Scientist, Energy and Power sector, CSTEP

The concept of rooftop subsidy was highly flawed and the program has been nothing short of a victim of its own inception. As we call them here at Surjaa, the “beneficiaries” have had a mixed bag of experiences. We lost our first set of prospective customers (and in huge numbers) because the hearsay was “but the subsidy didn’t come for person x who got it installed 9 months back” or “even the department people don’t know how to take readings of net-metering”. We saw it all.

The subsidy program was supposed to incentivise when a kilowatt of solar power plant installation would cost upwards of 70,000 taking into consideration the appropriate levels of engineering, design and ensuring we as EPC companies were NOT cutting corners during the installation process so that the upkeep and the dependence on this power would outlast the 25+ years we advocated. Thankfully, some of the EPC players did and continued to give the right products, service and a ‘high standard solution’ as we call it at Surjaa.

The subsidy program should have been stopped a long time back. The adoptees of residential solar rooftop have mostly been middle to upper middle urban class of people who changed this new technology and might have understood ROI calculations to some extent. It should have been capped at 1-2 kwp to be completely fair to the people like farmers or rural customers, who would have actually benefited.

Chaitanaya Rahul, Founder and Director, Surjaa Solar Solutions

Adopt Multipronged Approach To Kick Off Rapid Growth In Residential Rooftop Solar

The falling solar equipment costs, coupled with the subsidies offered by state governments and the increasing efficiency of modules, will certainly make rooftop solar even more financially attractive for house owners, thus triggering demand. But it will actually take much more than this to prepare the residential rooftop solar category for a take-off to the next level. Though these favourable factors have been in play for the past few years, rooftop installations in the residential category have not really picked up as anticipated despite the constantly rising electricity bills.

Unless the subsidies and downward price trend are backed by resolute measures to create more awareness among the prospective consumers, provide attractive financing options to developers and introduce effective net metering policies uniformly across the country, India will not be able to realise the immense potential of rooftop solar in the residential domain.

Another major impediment is the limited rooftop space, particularly in the emerging urban landscape dominated by multi-floored housing complexes. This problem can be effectively addressed by coming up with suitable group metering policies which will encourage residential townships to opt for rooftop solar in overwhelming numbers.

Therefore, a multipronged approach with renewed focus based on all these aspects is urgently needed to kick off rapid growth in the residential space.

Net metering is expected to emerge as a game changer in tapping India’s rooftop solar potential by enabling households to save on electricity bills and earn from the power they produce. Complemented by effective net metering policies, customised small-scale solar solutions, which enable households to optimally utilise their space for setting up rooftop solar plants, will propel installations in years to come.

Policy initiatives like viability gap funding of renewable energy projects and renewable purchase obligations will also give impetus to the rooftop solar industry. The residential market is expected to pick up in coming years on account of better policy support, lowering of solar capital costs, capital subsidies and substantial demand from the housing sector.

Simarpreet Singh, CEO and Director, Hartek Solar Pvt Ltd

To read the compleate story view our February issue

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