Mercom recently held a virtual panel discussion on ‘C&I Rooftop Solar – Best Shot at Reducing Operating Expenses’ to understand how affordable and accessible rooftop solar is despite the visible challenges.
The panelists discussed rooftop solar as an attractive option for commercial and industrial units to reduce operating expenses.
The panel was a blend of rooftop solar developer and consumers. The panelists included Damian Miller, Chief Executive Officer at Orb Energy; Lakshminarayanan Sankaran, Vice President Engineering & Maintenance at Bangalore International Airport (BIAL); Johnny Christo, Regional Manager – Energy & Utilities Global Supply Chain at Intel; and Yeshwant Bothra, Managing Director at Abhinandan Petro Pack.
Priya Sanjay, Managing Director at Mercom, moderated the discussion.
As of February 2021, India hit the 40 GW milestone in overall solar installations. Of this, 34.9 GW is utility-scale solar installations, and only 5.1 GW is rooftop solar. The rooftop solar sector has been growing but at a very slow pace. With just about 5 GW installed so far, the segment has a long way to go, with another 35 GW to be installed by 2022 if the target of 40 GW has to be met.
The panel agreed that rooftop solar has immense growth potential in India. However, the segment’s growth has been marred by inconsistent and restrictive government policies.
The installations in 2020 have been negative, with a 34% decline from the previous year due to the COVID 19 pandemic. The year 2021 doesn’t look promising either, with the second wave of the pandemic wreaking havoc, resulting in a dip in installations.
Embracing Rooftop Solar
Talking about an energy-intensive entity such as the Bangalore airport, Lakshminarayanan said that their annual consumption was 75-80 million units (MU) before the pandemic majorly grounded flight operations. The Bangalore airport has a 7 MW rooftop installation that produces 10 MU per annum.
He said, “Although air traffic is down due to the pandemic, we are still consuming roughly 75 MU. Through our rooftop installation, we consume 6.5 MU each month and roughly 250,000 units every day.”
When asked about the energy consumption, Lakshminarayanan elaborated, “As far as rooftop solar is concerned, our installations neither have batteries nor any net-metering arrangements. The energy generated by the installation at the site is consumed as and when produced, ensuring zero energy wastage. We also generate solar energy offsite, which makes it comfortable for us to manage our solar consumption.”
Representing Intel, a global semiconductor chip manufacturer, Johnny told the panel that distributed energy generation is one of the key strategies for achieving Intel’s 100% renewable energy target.
He said, “We have 55 MW of onsite alternative energy technology to supply power to 65 buildings globally. These are not just solar but 21 different technologies. However, solar power provides 65% of the total 55 MW of alternative energy generated. We started with solar in 2009 with 270 Wp modules. Now we are undertaking projects with 540 Wp modules. The development in cell technology has helped us comfortably draw more energy with limited space and meet our cost-saving goals without the need for any incentives. Except for fuel cells and solar technology, I have not seen any other technology impact us significantly.”
According to Johnny, the operating expense (OPEX) model – where the technology provider builds, owns, and manages the system – helped Intel avoid capital expenditure along with technology risk and operational risk.
He further added, “We have been buying energy from the technology provider at parity or below the actual power grid tariff since 2009. In India, Solar Energy Corporation of India issued a 30% subsidy in 2013, and we were the first ones to deploy the power purchase agreement (PPA) option in India. Finally, this is a technology where we can have a long-term commitment for minimal cost to sustain it. It helps us reduce our carbon footprint, and it creates goodwill and branding. Onsite solar is more visible to the external community.”
Yeshwant told the panel that Abhinandan Petro Pack, which exports plastic packs, has installed around 20 MW of rooftop solar onsite in Bengaluru, Karnataka.
Adding that going in for clean energy comes as an added benefit for a sector dealing in plastic that already has an environmental taboo attached to it; Yeshwant said that their experience was fruitful and seamless. “Our energy consumption is quite high, and Orb Energy helped us install 20 MW of solar panels. It is viable to consume all the power you generate through solar installations. This is a huge cost-saving method for micro, small and medium enterprises. The return on investment is four years, which is phenomenal. Also, embracing green energy helps build our image,” he added.
When asked what should push commercial and industrial (C&I) enterprises to invest in rooftop solar, Damian commented that rooftop solar is a no-brainer for the C&I segment in India.
“Although it is perfect for any C&I customer who has significant power requirements, rooftop solar installations make a small percentage of the existing solar installations across India. The biggest benefit is the reduction in the cost of power. The payback could be two to four years, depending on the size of the installation and the power consumed. Putting panels on your roof is the cheapest way of getting electricity,” he said.
Lakshminarayanan told the panel that BIAL was looking for an alternative energy source mix with solar, wind, and even fuel cells.
Noting that storage options incur high costs, he said, “Due to high cost of battery energy storage, BIAL is not seeking to work on a storage option. These batteries will last for three to four years, after which they will be discarded, which is not environmentally safe. It requires a lot of space too, which is hard to come by in an airport. It makes more sense to buy a battery that will last at least ten years. However, in a few years down the line, technology will improve, and we can consider adding batteries to the existing installations.”
“Solar generation is optimal from 10 AM to 4 PM when sunlight is available, and unless the energy consumption goes up drastically, the grid will have excess power. For a small enterprise, storage is not an economically viable option. In a few years, the technology will improve, and the cost will go down, making it viable for smaller businesses. In net metering, a part of the units generated will go back to the grid. But the government policies keep changing, and even rules regarding net metering can change. Solar installations are a minimum 25-year commitment and not a short-term investment. Solar power is generated during daylight, and either the government or the C&I consumer needs to set up energy storage solutions. However, an ideal scenario is if one has a rooftop installation and consumes more power than they generate,” Yeshwant added.
Savings from Solar
According to Johnny, savings from rooftop solar depends on where the installation is set up and its configuration.
“Our savings vary from 5% to 20%, sometimes going up to 50%, which is a huge band. In Intel, we have started migrating from traditional rooftop to carport structures, and the cost of the latter is 25% more. The cost depends on the type of load, and Intel is a high energy consumer with a high plant load factor. The quantum of solar power is less. Thus, we are not only looking at solar as just an energy-saving technology but also from an infrastructure perspective. Enabling OPEX is helping us build these high-cost infrastructures. We have built 20,000 parking lots globally where our participation is not through capital expenditures. We are getting all the infrastructure free of cost, saving millions of dollars. So, in Intel’s case, infrastructure cost avoidance carries prominence over supply cost due to our high plant load factor,” he explained.
He further added that technologies like rooftop solar are helping companies like Intel cut costs significantly, allowing them to achieve net-zero carbon goals without any incremental cost.
Echoing Johnny, Yeshwant said that rooftop solar has the least maintenance cost. “We have 20 MW installed, and 1 MW will take up 100,000 sq feet, which means a total of 2 million sq feet. We spend around ₹50,000 (~$680) a month to maintain 1 MW of panels, where we employ a few workers to clean the panels with water,” he added.
Lakshminarayanan told the panel that the rooftop installation at BIAL is not owned by the airport and is based on a PPA.
“BIAL has large sustainable goals, including going carbon neutral in 2020, which we maintained from December 2020 to March 2021. We have 7 MW of rooftop solar power. In the next few years, the airport will have enough area to host 7-10 MW of rooftop solar. Our in-house rooftop solar and open access installation give us a good power balance mix. Most importantly, the tariffs are lower than the rates offered by the distribution companies and are a huge boost for cost-savings,” he said.
Challenges in Financing Rooftop Solar
According to Damian, Orb Energy’s primary focus has always been the micro, small and medium enterprises (MSME).
“The financing which we bring to the table is quite different from what Intel has indulged in, which is an OPEX model. However, most OPEX providers will not service clients below a BBB rating, basically all the MSMEs. Around 40% of Indian industries belong to the MSME segment. Orb Energy does not go for an OPEX model because 10-15 years tenor on a PPA is long risk exposure. Even Small Industries Development Bank doesn’t grant loans above seven years. Our financing model revolves around credit, where the MSME will pay monthly installments to own the installation over four years. In some cases, we go up to five years. We have a transparent interest rate. The rooftop is theirs, and after they pay off their credit, the asset is also theirs. The best way to service MSMEs is to do away with the OPEX model and provide them long-term loans.”
“If the company has good financials and can explain to the banks the high return on investment, it is a win-win situation. We showed the banks our electricity bill and told them we would pay them loan installments what we pay to the distribution company in electricity bills. It took us five minutes to convince them to finance us,” he noted.
Making the right choice
Speaking about making the right choice of installation, Johnny advised that rooftop solar assets last for 25 years which makes it prudent to go for the quality of assets rather than the discounts offered on tariffs. Further, the roof has to be used to derive the maximum benefit. To optimize that, tier 1 technology with high-efficiency modules has to be selected with low degradation levels. Depending on the tenure of the contract, the consumers will be partnering with the installers for seven to ten years. The installers must be selected based on their credibility, service infrastructure, and market presence. Considering the basic customs duty of 40% that the government is planning to levy on the import of solar modules, it would be wise for the consumers to be in quick decision making and install solar on their roofs right away.
For consumers who are building a house or commercial unit now, ensure that you make provision for rooftop solar installations even if you may not install the system immediately. Designing the roofs to accommodate a solar system will save on costs in the future.
Also, solar technologies are being upgraded at a fast pace; for consumers choosing the OPEX model of installation, it would be advisable to have a clause in the agreement where the OPEX partner can upgrade the rooftop system with the latest technologies with no added cost to the consumer. Also, when the consumer plans to build another floor in the building, the rooftop system can be trans installed on top of the new roof.
According to Damian, bigger C&I players like Intel and BIAL, who have huge consumption, do not need net metering.
“But all companies do not have such huge power consumption, and it is advantageous for them to bank the power they generate than rather watch it go waste. In such cases, net metering is conducive. However, our large customers with over 500 kW installations need more energy to consume, and they can make use of solar energy, all of it, for their daytime loads. But net metering can work wonders for MSMEs, and we support the government’s plans to move the net metering cap from 10 kW to 500 kW.”
The Ministry of Power has issued a draft amendment to Electricity (Rights of Consumers) Rules, 2020, which allows net metering for rooftop solar systems of loads up to 500 kW or up to the sanctioned load, whichever is lower and net billing (gross metering) or net feed-in for above 500 kW.
Interest rate is a driving factor for SMEs when it comes to solar installations. “If the government wants to encourage the MSMEs to go solar, then they should make low-interest finance available, which can be channeled through intermediaries like Orb Energy,” Damian said.
He also added that the government keeps changing policies every year, which makes the market volatile. “If we have a three-year policy visibility, it will be a lot easier for the consumer,” Damian suggested.
To watch the full webinar, click here.
Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.