Rooftop Solar: Challenges and Recommendations

India has set itself ambitious targets for adding renewable capacity by 2030. Out of the 100 GW target for solar for 2022, 40 GW is proposed to be installed on rooftops. The rooftop solar segment seems to be lagging as compared to the utility-scale segment – we have achieved only about 4 GW nationally. Though the segment has doubled in capacity in the last year itself, its growth is being held back due to certain issues.

Listed below are the major issues and the recommendations, that if implemented by the government will aid in the growth of the sector:

1. Aligning the DISCOMs and the Developers

DISCOMs have a fear that if rooftop solar can grow without restrictions, they will lose some of their largest and best-paying Customers.

A comprehensive Gross Metering policy can help resolve this issue in its entirety. It is recommended that the DISCOM purchases the entire energy generated by rooftop plants. The entire electricity produced should be metered and exported to the grid.

The DISCOM should buy the rooftop solar power at their actual Cost of Supply (ACOS = APPC + T&D costs) and continue to supply electricity as usual to the customer at its regular tariff. Therefore, the DISCOM would not suffer any loss of revenue on account of rooftop solar. Unlike the current scenario where the entire benefit of rooftop solar was going to the rooftop owner at the cost of the DISCOM, this will ensure an equitable distribution of the savings between the DISCOM and the rooftop owner.

2. Removing restrictions on RESCO model and capacity caps by states

Some states have restricted RESCO model in the rooftop, while some have put a restriction on the size of the plant that can be installed at a consumer’s facility. The rationale varies from state to state.

• It is recommended that all caps and restrictions on rooftop solar be based purely on technical issues. Individual consumers should be allowed to set up rooftop solar plants up to their contract demand, and the total capacity in a distribution area should be capped basis the substation technical capacity.
• All restrictions on Rooftop solar plants based on ownership should be removed. Performance measurement data suggests that RESCO plants show better continued performance in the long run. Thus, the policy should encourage the growth of the RESCO model in the rooftop segment, just as it has in the case if the utility segment. Moreover, RESCOs will be able to provide better capital efficiency owing to their expertise in the solar domain.

3. Bringing uniformity in Statutory Approvals

Statutory approvals vary from state to state. Even within a state, the process of obtaining these approvals is not standardized. Nodal agencies also impose additional clearances not specified in the state’s solar policy. Finally, there are no defined timelines for the granting of approvals by the various agencies involved, leading to delays and losses, especially where net metering is involved.

Approvals should be standardised, clear timelines should be defined and adhered to.

4. Aiding Financing for rooftop solar projects

Financing continues to be a challenge, especially for smaller consumers or those with lower credit credentials. Also, a large portion of the credit facility for rooftop solar lies undeployed with the banks.

A credit guarantee scheme should be created to mitigate risk for customers with lower credit rating. This will enable such consumers to avail bank financing for their rooftop solar projects, and also enable developers to offer such consumers the RESCO model, as the inherent credit risk issue will be taken care of.

5. Avoiding frequent policy revisions

The Solar Policy issued by the SERCs undergoes extremely frequent changes and revisions. Such frequent revisions de-stabilise the sector and hinder its growth. It is recommended that revisions are not done so frequently. More importantly, all changes to existing policy should be applied only prospectively and should not apply to existing projects.

The government has renewed its focus on the rooftop solar sector. We believe that with the above recommendations in place, there will be accelerated growth in the industry. There is no reason why India’s rooftop solar energy sector cannot achieve, or even surpass the target set by the government.