Major Challenges for Rooftop Solar Power Plants in India

  • Upfront Capital Costs
  • Slow Adoption Rates
  • Lack of Clarity in Policies
  • Lack of Implementation of Incentives & Net Metering

Upfront Capital Costs

Solar power has a unique constraint in that almost all the costs for the 25 year project is right in the beginning.

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This is a challenge, as human beings are more comfortable paying as they go rather than pay up money up front.

With the costs of solar panels coming down, the upfront costs for rooftop solar have indeed come down dramatically, but it still is a fairly costly affair.

An alternative model that has emerged in the last few years is that is called the PPA model or the BOOT model. This takes care of the upfront capital cost constraint burden by making rooftop solar as a Pay as You Go model. More on the BOOT/PPA model in the Appendix.

Slow Adoption Rate

India has ambitious targets for rooftop solar, but on the ground, growth of rooftop solar has been rather average, between 2012 and 2015.

The central government has an awesome target of 40 GW for rooftop solar by 2022, over 100 TIMES what it is in May 2015 (a bit over 300 MW), so that should be very encouraging to entrepreneurs. At an approximate cost of 1 Lakh per kW installed, this would mean an investment of 4 Lakh Crores should the 40 GW be achieved by 2022.

Rs.4, 00,000Crores – that’s quite a business opportunity!

However, the growth so far has been stunted, and some of the key reasons and constraints are discussed in other points below.

Lack of Clarity in Rooftop Solar Policies

While some states have come up with rooftop solar policies, there is significant lack of clarity in many of these policies.

A recent review by Solar Mango team of rooftop solar policies for all those states that have announced such policies revealed three main aspects where clarity was missing

  1. Net Metering – while many states had announced intentions for Net Metering, very few actually have demonstrated that Net Metering actually works in their states
  2. Targets – while most states with a rooftop solar policy had announced targets, very few states had provided an actionable blueprint for the same. As a result, there is a good amount of justified scepticism amongst businesses whether these targets were realistic and practical
  3. Little support from SNAs – The SNAs in very few states are well equipped to understand the technical and operational complexities involved in rooftop solar projects; as a result, they are unable to provide clear answers and directions to those who seek them in their states

Lack of Implementation of Incentives & Net Metering

Subsidy Implementation Delay

Capital subsidies for rooftop solar power were mentioned earlier. It was also mentioned that in many cases the disbursal of capital subsidy, specifically those from the centre, was delayed severely.

This delay had a double-whammy effect on the growth and adoption of rooftop solar. On the one hand, it left those who had put up rooftop solar with the promise of early subsidies highly disappointed and this bad news spread fast.

At the same time, owing to the news of this delay, those who were keen on putting up rooftop solar power plants were keen that the rooftop vendors give them the subsidies right in the beginning so that they need not wait for the subsidy and the vendor could collect it from MNRE at a later date. This was not feasible for many vendors. Unfortunately, the promise of subsidy that never happened also delayed decisions by those companies or residences that would have put up a rooftop solar power plant even without a subsidy, as now they were left with a feeling that they should wait until they were clear on the disbursal of subsidies.

Net Metering Implementation Delay

As mentioned earlier, Net Metering can be a crucial driver for growth of industrial and commercial rooftop solar installations. While a number of states have announced Net Metering policies and regulations (with some states such as Karnataka even offering handsome tariffs for power exported to the grid from rooftops), a Solar Mango survey found that the actual implementation of these Net Metering schemes has been very slow in many states. In some states, we found that the SNA that was supposed to spearhead the Net Metering implementation did not have adequate knowledge of executing the project.

Overall, a study by Solar Mango showed that Net Metering is not a new or difficult concept to implement; all it requires is a proper co-ordination between the state electricity regulator (the SERC), the DISCOM and the state nodal agency.

At Solar Mango, we are optimistic that delays in Net Metering implementation will be sorted out at least in a few important states by end of 2015.

List of Challenges in Rooftop Solar Marketing and Customer Acquisition

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Problems in customer acquisition Criticality of the problem
Awaiting subsidy High
Not high business priority High
High Capital Cost/Raising Money High
Poor salesmanship Medium
Lack of clarity Medium
Negotiations with other vendors for low price Medium
General corporate inertia Medium

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