Rooftop solar is gaining significant traction among commercial and industrial (C&I) companies in India, primarily due to its potential for substantial energy cost reduction. Additionally, businesses can profit by selling excess energy back to the grid through net metering arrangements.

The result has been that India added 1.1 GW of rooftop solar capacity in the first half of the calendar year 2024, which is the highest half-yearly installation to date, according to Mercom India’s newly released Q2 2024 India Rooftop Solar Market Report.

States like Tamil Nadu, with its large industrial base, stand to benefit greatly from this surge in solar installations.

The cost of installing rooftop solar systems varies based on project size and site conditions, with the average price hovering around ₹26,000 (~$309) per kW. For instance, a 1 MW rooftop solar project in Tamil Nadu can generate approximately 1.4 million units of electricity annually under optimal conditions, offering considerable savings on electricity bills. With current tariff rates, the investment typically pays off within three years.

At Mercom India’s C&I Clean Energy Meet in Coimbatore, Anurag Chivilkar, Director & VP – Business Development at Roofsol Energy, emphasized that while cost savings remain a key motivator, pressure from investors to meet green energy mandates is a growing driver behind the adoption of rooftop solar in industries. Solar power is pivotal in achieving environmental goals, enhancing both compliance and corporate reputation.

Businesses also benefit from attractive financial incentives, such as accelerated depreciation, allowing companies to save significantly on taxes. By reducing reliance on grid electricity, rooftop solar lowers energy costs, improving product competitiveness.

Manikandan S, Director at SPERO Mobility and Energy Solution, pointed out that regions like Coimbatore are experiencing a rise in green energy demand, particularly in the textile industry, which is under increasing pressure to reduce carbon emissions due to regulations like the Carbon Border Adjustment Mechanism (CBAM).

However, before investing in solar, industries must carefully consider capital expenditures and potential savings. According to Chivilkar, financing is a critical factor, with a 20% internal rate of return (IRR) considered attractive.

Despite the many benefits, rooftop solar adoption still faces challenges. Policy instability, lack of awareness, and complex financing options continue to hinder wider implementation. Stable, long-term government policies and improved financing solutions are urgently needed to drive broader adoption.

Selecting the right vendor is another challenge, as about 65-68% of the market remains unorganized. Businesses must ensure they work with reputable EPC (Engineering, Procurement, and Construction) providers and verify the authenticity of the solar modules they use. Given that solar modules account for 55-60% of total project costs, any issues with them could have serious consequences. Proper verification of documentation and test reports is essential.

Chivilkar also highlighted the transition from p-type to n-type solar panels, which offer higher efficiency and lower degradation. Although initially more expensive, the price gap between the two types has narrowed as more manufacturers adopt n-type technology.

Inverters, another crucial component of solar installations, also play a significant role in determining costs. String inverters are commonly used in smaller setups, with some models incorporating optimizers to boost efficiency, albeit at a higher price.

Traditionally, MSMEs and large companies have focused on their core operations, outsourcing power management. However, the rise of renewable energy—particularly solar—has introduced new complexities, requiring businesses to evaluate factors like panel types, maintenance, and safety protocols.

To address some of these challenges, the Southern India Chamber of Commerce and Industry (SICCI) is developing a user-friendly app to help companies compare solar vendors and solutions, understand regional options, and make informed decisions.

Chivilkar shared that Roofsol Energy has introduced models to ease cost concerns. One option allows customers to avoid upfront capital investment by offering discounted power rates under long-term agreements (typically 15-25 years). For example, power rates may drop from ₹8 ($0.095) to ₹4.2 ($0.05) per kWh under this operating expenditure model. However, these power purchase agreements (PPAs) are generally available only to industries with solid credit ratings.

For companies without formal credit ratings, financing options like Equated Monthly Installment (EMI) plans are available, requiring a 20-25% equity contribution from banks, while private investors may offer 100% financing at higher interest rates (around 9.5-10%).

Leasing options are also becoming more popular. Under these arrangements, companies like Tata Capital or Siemens Capital retain solar system ownership for at least five years before transferring it to the customer.

The next event will be held in Pune on September 20, 2024. You can register here.

Contact us if your business is planning to install solar and need guidance or vendor recommendations.