State and central subsidies coupled with increasing demand from the government, commercial and industrial sectors, have enabled the steady progress of the rooftop solar sector in India.

Cumulative solar rooftop installations in India totaled 3.2 GW at the end of December 2018, and 1.6 GW of rooftop solar capacity was installed in the previous year.

According to the India Solar Market Leaderboard 2019 report, CleanMax led the rooftop market by installing 107 MW in 2018 at a 170% growth rate year over year. To understand this dynamic sector better and from a better vantage point, Mercom had an interaction with Manu Karan, Vice President, CleanMax Solar, a leading developer in this sector. Here are the edited excerpts from the interview:

Rooftop is a booming market, with a lot of growth potential and investment opportunities. For solar-specific lending, the environment has improved with banks becoming familiar with the norms of the sector. Three years ago, raising debt for the rooftop solar segment was challenging; however, there have been positive changes, and banks are less skeptical about lending now. The overall lending environment is going through challenges, and we have seen some impact. Our projects are typically 65-70% debt-funded. The last couple of quarters have been less than ideal but still manageable.

Yes, we have seen very positive interest from the education segment. For the education sector, there is a strong impetus from SECI to adopt renewable and rooftop solar is their preferred choice due to the investment-free RESCO model for adoption.

The growth is attributed to the economics, as rooftop solar is 25-40% cheaper than the prevailing DISCOM tariffs across India. In the education space, most universities and research centers have large campuses owing to which they have great potential to achieve their sustainability goals through the adoption of rooftop solar. Rooftop solar installations not only abate carbon emission but also help with significant cost savings on electricity bills. The key regulatory policy that enables this segment is net-metering. As you can imagine, most educational institutions have about 100 days of holidays in a year. The ability to export the power and get credit for it at some other point of time is a critical enabler for this market, and to be able to finance projects for this segment. CleanMax Solar has equipped more than 35 educational and research institutes across India to adopt solar power.

The key driver for the growth of the rooftop solar market is the corporate segment. Corporates are keen to meet their sustainability goals coupled with cost benefits by adopting renewable. Furthermore, the Energy Sale model, pioneered by CleanMax Solar, is an added incentive for corporates to adopt solar without any hassle. With this model, companies do not have to make any investment in a rooftop solar project and can buy solar power faster due to simpler procurement approvals. The performance risk lies with the developer, and the client pays only for the power generated, which is 25-40% cheaper than prevailing DISCOM tariffs in the specific states. The government has also promoted this model, popularly called RESCO for speedy adoption of rooftop solar across government buildings and institutions. 

Just as any other asset, solar projects need to be protected by insurance against malicious damage, or loss due to disasters like floods, earthquake as well as, fire, theft, etc. So, a property and business interruption insurance is indeed needed for rooftop solar projects. This also enables banks to lend to the projects under the energy sale model comfortably.

Sometimes, even add-on coverages are taken for machinery and electronic equipment to ensure any breakdown due to mechanical or/and electronic causes is covered.

Also, as part of our comprehensive EHS policy, we ensure any physical damage or bodily injury to our third-party vendors while working at our sites is covered under a third party-liability or public liability insurance.

Adoption of rooftop depends heavily on net-metering – the policy is crucial for developers as well as customers. Net metering has always been seen as a threat by DISCOMs and has been a drag on the rooftop sector. Policy implementation is not always consistent, and in most states, there is an artificial cap on the size of rooftop solar projects to avail net-metering benefits. Even the process of getting net metering approvals remains bureaucratic in most states, with confusion about requirements between DISCOMs, officials, and various government departments.

Currently, the commercial & industrial sector is generating the demand for the sector, but even the new Tamil Nadu policy doesn’t allow net-metering for HT consumers. This excludes most Commercial & Industrial power users from availing benefits of adopting rooftop solar. Given that the adoption is driven by the C&I segment, the policy seems to be inadequate.

Also, Gujarat, for example, doesn’t provide net-metering benefits for consumers who have installed solar project using RESCO/OPEX model. Expecting customers to make large investment into solar adoption will stagger the growth of rooftop solar. The government should look at introducing policies that are standardized and long term. This will reduce the skepticism and propel adoption.

There are also challenges in other markets like Uttar Pradesh, for example, where recently they removed the existing net metering policy for most C&I customers, and this is applicable retroactively too. Such changes create a challenge to attract financing in this segment. These retroactive changes in net metering will discourage the adoption of rooftop solar and will have a negative impact on future projects. Maybe a discussion on the appropriate compensation for surplus power injected into the grid would be healthy, but to deny injection into the grid altogether would not be in the interest of consumers or developers.

Additionally, there is untapped potential in the residential segment, which can be pushed by introducing favorable policies. These sectors need incentives to take off at a large scale, both for consumers to see value and developers to venture.

CleanMax recently raised ₹2.75 billion (~ $39 million) in investment from the United Kingdom (UK) Climate Investments LLP (UKCI), which is a joint venture between the Green Investment Group and the U.K. Government’s Department for Business, Energy and Industrial Strategy.

The funds are expected to support CleanMax Solar’s business expansion and development of a nationwide network of solar photovoltaic (PV) farms for corporates.