Shining Light on India’s C&I Distributed Solar Revolution: Insights, Challenges, and Future Prospects – Balawant Joshi, Managing Director, Idam Infrastructure Advisory

Key Highlights

• Post-pandemic, improved policies like net metering and Green Energy Open Access are driving rapid distributed solar adoption.
• Advancements in PV efficiency, storage systems, and AI applications crucial for enhancing affordability and efficiency of installations.
• Successful financing models like CAPEX, OPEX, and emerging trends in deferred CAPEX are propelling C&I distributed solar uptake.

1. What factors drive the adoption of distributed solar among commercial and industrial (C&I) enterprises, and how has the market evolved post-pandemic?

Distributed solar market in C&I category can be divided into two, rooftop solar and open access. Further, open access market is divided into captive OA and third-party OA. For all three markets, high energy costs have been main driver. Government of India has been insisting on implementation of Green Energy Open Access and easy rules for rooftop. Further, Hon Supreme Court providing clarity on majority of issues associated with captive power. This has forced distribution licensees to soften their opposition to distributed solar. While policies are still neither ideal nor uniform across the states, they are much better as compared to pre-pandemic period. Further, some big states have adopted pro-renewable regulations recently. For example, Maharashtra has raised upper limit of installation to 5MW for net metering. As a result, the market is expanding rapidly.

2. What technological advancements are crucial for improving the efficiency and affordability of C&I distributed solar installations?

The Solar PV sector has been diligently focusing on improving efficiency of PV modules while simultaneously working towards achieving greater affordability. While PERC modules are already commercially viable, other technologies like TOPCon (Tunnel Oxide Passivated Contact), HJT (HeteroJunction Technology) will further push efficiency beyond 25%. The Bifacial, CIGS and CdTe technologies are also marking their advancements. Apart from PV technologies other advancements that would be crucial for distributed solar in C&I are:

1. Incorporation of Solar Technology into Building Materials – The future may see solar technology embedded directly into building materials, such as solar windows or solar tiles. This could make every building a potential power generator.

b. Advances in battery energy storage systems – Decreased costs would help integration of storage system not only for stabilized and efficient power supply but also to deal with time of day tariffs. 

c. AI and Machine Learning Applications: As in many other fields, AI and machine learning could play a significant role in the future of solar power. These technologies could be used to optimize energy production and consumption, manage grid systems, and even predict system failures before they occur.

3. How do regulatory policies and incentives affect the growth of distributed solar projects in the C&I sector in India, and what regulatory barriers exist?

There are several regulatory roadblocks hindering the growth of the rooftop solar market. But, probably the most serious issue is inconsistent net metering policies across states and their varied implementation. Net metering is a crucial parameter that influences the financial viability of a rooftop solar plant. Fearing loss of revenue from their high-paying C&I consumers, state owned electricity distribution companies (DISCOMs) sometimes delay the net metering approval or fail to provide approval altogether.

Several new metering mechanisms such as gross metering, behind the meter, virtual net metering, group net metering, etc. are emerging in rooftop solar sector. Many state regulators have not permitted these metering mechanisms. It’s important that regulators realize importance of development of distributed solar energy and enables such mechanisms.  

Lastly, the issue is related to implementation of Green Energy Open Access. Many states have put roadblocks in implementation of GEOA. Where GEOA is allowed, state regulations don’t allow a consumer to avail both GEOA and rooftop solar simultaneously. The regulators need to take cognizance of this issue and change regulations to allow both. 

4. What are the main challenges and opportunities in India’s C&I distributed solar market compared to other segments and regions?

With positive moves like lifting the installed capacity limits to lowering the open access limit to 100kW, C&I sector is a Hot cake. Additionally distributed solar is a key component in C&I segment for fulfilling RE100 goals. Share of C&I sector is 40-45% in all India energy consumption, this itself explains the potential for deployment of distributed solar. Despite this, like discussed in earlier, the regulatory challenges will remain prominent barriers. The charges levied by state regulators on GEOA will create barrier for adoption at least for LT consumers. To some extent, financing has been a concern for MSME sector due to significant initial investment required. 

5. What financing mechanisms and business models are successful in driving C&I distributed solar adoption in India, and are there any emerging trends?

In rooftop solar sector, CAPEX is the largely favored and adopted business model. The OPEX mode is preferred by C&I consumers not willing to invest upfront. Another model picking up is deferred CAPEX (option of paying through monthly installments). There are several FIs and NBFCs offering financing products for small rooftop solar specifically targeting MSMEs. These FIs/NBFCs have relaxed the stringent eligibility and collateral conditions to reduce the hesitation among MSMEs to opt for solar.

6. How will distributed solar evolve within India’s C&I sector considering renewable energy targets and sustainability goals, and what are the key drivers of future growth?

With the falling costs of solar power and the decarbonisation goals of Commercial & Industrial (C&I) consumers, uptake of renewable energy is expected to increase continuously. Further, pressure from international companies to green ‘supply chains’ is forcing MSMEs to adopt solar power. Policies such as Carbon Border Adjustment Mechanism or CBAM is putting additional pressure on export-oriented industries like steel and aluminum. Reducing costs of battery storage technology is creating possibility of round the clock using RE technologies which is attracting continuous process industries as well as new age businesses like data centres.

The preferred business models would be rooftop solar, captive, group captive and Open access mechanism. Conducive regulatory and policy landscape, reasonable financing options will be kay drivers for future growth of RE in C&I sectors.