Subsidy Disbursement Delays are Hampering Growth of Residential Rooftop Solar in India

The Indian solar installation goal of 100 GW by the year 2022 set by the government calls for 60 MW of large-scale solar and 40 GW of rooftop solar. Though large-scale solar has witnessed exponential growth year-over-year, rooftop solar has lagged with approximately 2 GW installed as of March 31, 2018, according to Mercom’s India Solar Project Tracker and the current pace of installations is not sufficient to meet rooftop solar target in face of the 2022 target.

Rooftop solar has faced regulatory issues, lack of awareness among consumers, high upfront costs, and lack of consistent policy support from the states especially in net-metering. However, with time the nature of challenges faced by the rooftop sector has changed and now one of the challenges plaguing the residential solar installers is the delayed disbursement of subsidies and incentives.

A bottom-up analysis performed by Mercom in its 2017 Q4 Solar Market Update found that India’s rooftop installations grew by 56 percent year-over-year to reach a cumulative total of nearly 1.6 GW on December 31, 2017.

Securing project financing has been a herculean task as most of the installers are stuck waiting for the subsidies and incentives to be granted by nodal agencies which reflects negatively when they meet the financial institutions.

For rooftop solar to completely takeoff in India, residential rooftop solar needs to expand, as it has the most untapped potential. In the commercial segment, many companies are turning to rooftop solar to meet their energy demands, but due to high cost of rooftop generating systems, residential solar is dependent on subsidies. In order to alleviate the obstacle of high upfront costs, subsidies have been put in place, but their disbursements are often delayed, putting the developers and EPC contractors in a tough spot.

Talking about the issues faced by installers, a top-ranking executive at a rooftop solar developer said, “In the rooftop market, the subsidy amounts are blocked and the government is not providing the money, making it really difficult for the installers to do their day to day activities. Due to this, mostly everybody is in trouble, many of the installers have stopped doing subsidy projects. Our next step is to get that subsidy money and stop doing subsidy related rooftop projects”.

Another executive at a rooftop solar project developer told Mercom, “These days, we cannot execute the projects in rooftop with ₹40.5 million/MW. In rooftop, most of the quality players are not participating in the residential segment as getting money from the government is really very difficult”.

Few other rooftop solar developers and EPC firms reiterated the fact that in India, rooftop solar sector is growing but delay in subsidy release is creating hurdles in its path. Many EPC players are competing for single projects and the subsidy segment is drying up; reason being the untimely release of subsidy amount by the nodal agencies. Most of the installers’ capital is stuck in the subsidy mechanism. Another important issue in residential rooftop segment is the operation & maintenance (O&M) cost for five years as developers are not getting the promised subsidy and they have to provide O&M service to clients, which is a loss for them.

When contacted, Mercom’s source at rooftop project developer CleanMax Solar said, “Subsidy disbursement takes some time, that is a procedural delay. Moreover, we are involved in developing rooftop solar projects for commercial and industrial customers, so we have not faced this issue of delay.”

“Having said that, I would like to add that the smaller players in the rooftop solar sector may be suffering if they are in the residential rooftop segment and are dependent on subsidies,” added the executive.

When contacted, a Ministry of New and Renewable Energy (MNRE) official said, “Subsidy disbursement is not only in our hands. There is a due process. Now, if the due process is not followed and right data is not provided to the nodal agency, then how can we be sure of disbursing the subsidy in a timely manner.”

The MNRE official further stated, “Once the pertaining data set to the projects is made available, we will disburse the subsidy amount.”

Recently, MNRE had issued a notice asking all the implementing agencies in the country to adhere to the grid-connected rooftop (GCRT) solar guidelines issued in 2016.

When contacted, a top-executive at a major Indian rooftop solar developer said, “We are trying to get away from the subsidy business in rooftop solar. In North East India, we and others have executed projects, but subsidies haven’t yet come. In other parts of India, RESCO projects have been taken at low rates keeping subsidies in mind, but these subsidies aren’t forthcoming, creating an issue for us.”

When asked whether a delay in uploading data sets pertaining to projects has resulted in delay in subsidy disbursement, the executive said, “Yes, it is partly correct. But, the main problem is that there is no smooth process for this. Still, the entire thing hinges on the old nodal agency setup which is creating issues.”

“Considering delayed subsidies and lax implementation of net-metering, it is difficult to see the residential rooftop segment taking off in a meaningful way in the near future. Residential solar is already beset with challenges such as lack of awareness among consumers and financing difficulties which are holding back growth. Smaller installers will once again end up getting burned for trying to get into this market,” said Raj prabhu, CEO of Mercom Capital Group.

“It is mindboggling that the subsidies that were setup to facilitate residential solar installations is actually having the opposite effect. The only way for installers is to only focus on regions where it makes financial sense without subsidies,” added Prabhu.

Image credit: By Oleg Savitsky [CC BY-SA 4.0], from Wikimedia Commons

 

Saumy Prateek Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.