The rooftop solar segment in India has been growing at a brisk pace, with cumulative installed capacity reaching 3,260 MW as of December 2018. Rooftop installations grew 66% (year-over-year) with capacity additions of 1,655 MW in 2018. However, rooftop installations still only make up 12% of total solar installations in the country and India cannot meet its target of 100 GW of solar by 2022 without strong supportive policies for rooftop solar.
New policy ideas and implementation by central and state governments is the need of the hour as we are beginning to see some slowdown due to ongoing elections.
Last year, Mercom reported that net metering policies and implementation have been sluggish in the country. Since then, several states including, Uttar Pradesh, Gujarat, Rajasthan, Goa, Tamil Nadu, Himachal Pradesh, and Delhi NCR have revised, amended or proposed new regulations to their rooftop solar net metering policies. We decided to take a deeper dive into recent changes to assess the impact on the ground.
Speaking to Mercom about the current state of the rooftop segment, Andrew Hines, co-founder at CleanMax Solar, said: “We believe that unlike regulated segments such as utility-scale and open access solar, rooftop solar for commercial and industrial (C&I) consumers have been witnessing more consistent growth, which is based primarily on compelling economic proposition to consumers.”
Commenting on new rooftop solar policies, Vishal Toro, senior manager at Fourth Partner Energy, commented, “Southern states are gradually improving, for example in Karnataka you do not need to get clearance from the chief electrical inspector of projects below 1 MW capacity and Tamil Nadu’s new solar policy allows low tension consumers to install rooftop solar projects in the state. We would also like to see the project size cap of rooftop solar to be increased.”
Most of the growth in the rooftop segment is currently coming from C&I consumers but residential rooftop has lagged due to financing challenges and unfriendly net metering policies in states where the policy exists mostly in name only. Net metering has always been seen as a threat by DISCOMs and has been a drag on the rooftop sector. Approval processes can be lengthy which can last anywhere between three to six months, discouraging most consumers.
On being asked about the implementation of net metering policies, Rahul Gill, Managing Director of Candi Solar said, “We rely heavily on net metering – the policy is crucial for us as well as our clients. Policy implementation has been robust in states such as Haryana, Rajasthan, and Punjab but we have faced challenges in other states. For example, in Maharashtra, as the developer, we must supply power to the grid on the HT (high tension) side ourselves for small-to-medium size clients, which is not conducive to rolling out a large amount of rooftop solar for such a socioeconomically critical part of the Indian economy.”
Gill further added, “The process of getting net metering approvals remains bureaucratic in most states, with confusion about what’s required between DISCOMs, officials, and various government departments. However, in a few regions such as Chandigarh, the mechanism to acquire approvals is relatively efficient since it is a digitized process. We would like to see this replicated in other parts of the country as well.”
Recent rooftop developments in some of the key markets include:
In September 2018, it was announced that the residents in Delhi’s co-operative group housing societies (CGHS) who want to adopt rooftop solar would not have to pay for the installation of solar photovoltaic (PV) systems.
The arrangement, says the Delhi government, would be based on a tripartite agreement between the concerned group housing society, the service provider and the Delhi government. Most rooftop solar projects installed in Delhi are on the commercial, industrial and government-owned building. The move is expected to help faster adoption of rooftop solar by residential consumers. The Delhi government has been spearheading changes in rooftop solar policy by including measures such as generation-based incentives, and drafting group net metering and virtual net metering regulations.
In November 2018, the Uttar Pradesh Electricity Regulation Commission (UPERC) issued draft net metering regulations that allow consumers to choose from a net or gross metered set up. Also, the draft also laid out conditions for third-party owned gross metered projects. To provide flexibility to rooftop solar power prosumer, a provision of the mutual sale and purchase of electricity through peer-to-peer transactions with a proper accounting and billing mechanism (implemented with the help of blockchain technology) has also been provided. The UPERC also stated that the installed capacity of projects will not be less than 1 kW and will not exceed 2 MW.
Things were looking good in Uttar Pradesh in January 2019, when the UPERC finalized these regulations and extended the upper cap on net metered projects. However, in a strange turn of events there, the UPERC canceled its net metering policy for rooftop projects, and currently, it is only allowing gross metering. Developers are concerned about this, and they believe that it would hurt rooftop solar installations in India.
When asked to comment on Uttar Pradesh’s move to cancel net metering, Hines commented: “Any move to withdraw net metering altogether will discourage adoption of rooftop solar. Retrospective changes, in particular, will have a negative impact on future projects. I think a debate about 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 any consumer, whether or not they avail net metering themselves.”
Gill also expressed his concern about Uttar Pradesh rolling back net metering in mid May 2019, stating that “Uttar Pradesh has a lot of potential for rooftop solar for C&I SMEs, so it would be a big shame to see the state cancel or severely limit net metering given they are not close to hitting their RPO targets”.
“In the case of Uttar Pradesh, developers are in touch with UPERC, who is open to feedback on the cancellation of net metering, as of now the state is not allowing net metering connections for new projects,” added Toro.
In January 2019, in an attempt to boost the deployment of rooftop solar, the Goa government approved amendments in the Goa State Solar Policy – 2017. The policy aims to provide a subsidy of up to 50% for small prosumers in residential, institutional, and social sector category with solar plants up to 100 kW capacity.
In March 2019, the Rajasthan Electricity Regulatory Commission (RERC) amended its net metering regulations passed in 2015 for rooftop and small solar grid interactive systems. The commission announced a provision for payment to domestic consumers with net-metered rooftop solar PV systems for the electricity injected. The provision stated that in the event of electricity injected by a domestic category consumer exceeds the electricity consumed during the billing period; such excess injected electricity above 100 units will be paid by the DISCOM at the rate of ₹3.14 (~$0.04)/kWh. The commission also laid down regulations on the upper limit of an excess generation that is to be compensated for. The RERC noted that the tariff determined through the auctions for mega solar power projects could not be made applicable for rooftop solar because of the lack of large volumes of power generated.
In March 2019, the government of Gujarat approved a policy that aims to develop the state’s small-scale distributed solar PV sector. The policy is expected to facilitate the development of small-scale solar PV projects with sizes ranging between 0.5 MW to 4 MW. The policy also stated that any company, corporation, or individual could set up projects to sell power to utilities for their renewable purchase obligation. The applicable tariff for power purchase agreements (PPAs) for such projects will be the average tariff discovered in GUVNL auctions in the past six months plus ₹0.20 (~$0.0029)/kWh. It is important to note that Gujarat still does not allow third-party owned rooftop solar projects in the state.
In March 2019, the Tamil Nadu Electricity Regulatory Commission (TNERC) issued new net metering guidelines for solar rooftop consumers as part of its Solar Policy 2019. The guidelines allow the eligible consumer to install a maximum capacity of solar rooftop up to 100% of their contracted demand with the distribution licensee. Also, eligible consumers will also have to install two meters under the solar net feed-in program. The first meter would be used for measuring solar power generation and the second would be used to measure import and export of energy.
The central government has also been active when it comes to rooftop solar. In March 2019, it approved the launch of the second phase of the grid-connected rooftop solar PV program in India. The program aims to help achieve the targeted 40 GW of rooftop solar PV capacity by 2022. Under phase-II, 38 GW of grid-connected rooftop solar PV capacity is expected to be installed. The Indian government also plans to provide ₹118.14 billion (~$1.66 billion) as central financial assistance (CFA) for capacity building, service charges, and incentives to distribution companies (DISCOMs). Phase-II consists of two components:
- Component A in which 4 GW of grid-connected rooftop solar PV projects will be developed in the residential sector with CFA
- Component B through which incentives will be provided to DISCOMs
Although most states have developed rooftop solar policies and are actively amending them to be more inclusive and encourage adoption by consumers, our interactions with rooftop solar developers lead us to believe that the sector is not growing due to the government’s policy push but due to pure economic fundamentals, at least for the commercial and industrial consumer segment.
“Over the past year, states such as Tamil Nadu and Himachal Pradesh have introduced or revised their rooftop solar regulations. However, most states’ regulations still have arbitrary technical criteria which constrain capacity growth. There is also a need for new ideas and new policies to encourage rooftop solar for small and medium-sized enterprises (SME) and residential consumers, where growth has not yet taken off.” Hines added.
As the allocation for utility-scale solar projects is slowing down due to land and transmission constraints, it is very important for policymakers to focus on rooftop solar, especially on underserved segments such as SME’s and residential power consumers. This can only be done if regulators can incentivize and create awareness among these consumers.
“New creative and supportive policies are needed to help grow rooftop solar beyond C&I segments. It is clear that India cannot reach its 100 GW of solar by 2022 goal without a serious policy push to get residential and small commercial segments moving,” said Raj Prabhu, CEO of Mercom Capital Group.
For now, the rooftop solar target of 40 GW by 2022 seems distant, but it is never too late for a policy push.