We need to consider new models of financing as well as partnerships to be successful in scaling up the solar technology present in the Indian market.
In order to reach the national target of 40 GW, rooftop solar capacity needs to increase 32-fold in the coming five years. Of the total installed rooftop solar capacity of 1.25 GW (until Dec. 2016), the industrial sector has deployed the largest share, followed by the commercial sector and then the residential sector (Figure1). Most of the remaining target is also expected to come from the industrial sector (44%). To meet this target, the sector has to increase its capacity by close to 37 times. The commercial sector also has to expand its contribution by about 37 times to host its expected capacity of 12.06 GW. Though the expected share of residential and public (government) buildings in the national target are comparatively less, they also have to expand their contribution by close to 21 times to meet the national targets.
The sectoral growth estimates are calculated based on the assumption that governmental and residential buildings will contributeapproximately 10 GW to rooftop solar by 2022.
Investment needs to achieve the national rooftop solar target
Given the considerable gap between currently installed and expected capacity by 2022, there is large need for investments in rooftop solar capacity. Estimates of investment needed to scale up rooftop solar are subject to costs for solar panels, capital, labor and operations, and levels of national and state-specific subsidies and taxes.
Table 1 shows the estimated investment needs of the rooftop sector for the outstanding
38.75 GW of solar power necessary to achieve the 2022 target. Based on our interviews with municipal government officials in New Delhi and Surat, and the benchmark prices of rooftop solar, the estimated price for residential buildings is INR 70,000 per kW and INR 65,000 per kW for governmental, commercial and industrial buildings. In the calculations, we have also considered the current levels of subsidies available for rooftop solar systems across different types of states. Furthermore, we have also calculated a 35% tax on the accelerated depreciation at the rate of 40%.
Drivers for rooftop solar adoption in India
There are many factors driving the adoption of rooftop solar in India. These include cost savings, energy access, “green” benefits, and government mandates.
Rooftop solar offers significant and increasing costs savings
- Cost savings are the key driver of rooftop solar in India:
- In many Indian states and market segments, the levelized cost of electricity (LCOE)5 of rooftop solar is already lower than the existing average grid rates of tariffs paid.
- Rooftop solar is approximately 17% and 27% cheaper than the average industrial and commercial tariff respectively (Figure 3), without considering net-metering policies.
- Rooftop solar is also already achieving grid parity in the residential sector in states such as Uttar Pradesh, Maharashtra, and Rajasthan.
- In the governmental sector, rooftop solar hasbecome competitive in Delhi, Uttar Pradesh, Karnataka, Haryana and Andhra Pradesh.
- In other states, the gap between rooftop solar and conventional sources of electricity is fast decreasing.
Figure1 (center): Shares of rooftop solar capacity by sector in India in 2016 &
Figure 2 (right): Expected shares of rooftop solar capacity by sector in India to achieve 2022 target (38.75 GW)Figure1 (center): Shares of rooftop solar capacity by sector in India in 2016 and Figure 2 (right): Expected shares of rooftop solar capacity by sector in India to achieve 2022 target (38.75 GW)
Figure 3: Average electricity tariffs for different states and market segments and rooftop solar LCOE
Credit: Scaling up Rooftop Solar Power in India: The Potential of Solar Municipal Bonds, CEEW Report, June 2018