Union Budget 2024-25: Why India’s rooftop solar plan fails to spark interest

The Government of India has embarked on an ambitious mission to install rooftop solar plants in 10 million households all over the country. This initiative aims not only to alleviate the burden of electricity expenses on the poor and middle class but also to bolster India’s energy self-reliance. However, the project is not prompting as much enthusiasm as hoped. 

The central government’s National Rooftop Phase II grid-connected programme related to solar energy is already running. Many state governments are also giving their own subsidies to this scheme. However, even then, the scheme has failed to attract the common people in states like Uttar Pradesh (UP), Bihar, Tamil Nadu and Madhya Pradesh (MP).

REC Ltd, designated as the agency to implement the programme, has approved approximately Rs 15,000 crore for eight central public sector undertakings to facilitate the installation of rooftop solar projects. With a commitment to lend up to Rs 1.2 lakh crore, REC aims to catalyse the deployment of 10 million rooftop projects across the country. While initial efforts have begun in states such as UP, Chhattisgarh, Rajasthan, Maharashtra and MP, the lack of public enthusiasm remains a significant hurdle.

Despite existing national and state-level schemes promoting rooftop solar, including the National Rooftop Scheme and state government subsidies, participation rates have been suboptimal. One of the primary challenges is the complex and time-consuming installation process, which is exacerbated by bureaucratic delays and a lack of awareness among potential beneficiaries. 

Furthermore, the absence of streamlined financing options and limited manufacturing capacity for solar cells and modules create additional challenges. Inefficient load extension procedures and the need for feasibility studies stymie progress, contributing to a slow growth trajectory for residential rooftop solar installations.

However, some steps can be taken to remedy these issues.

Timely implementation and penalty clauses: Establishing fixed timelines for installation tasks and implementing penalty clauses for delays can incentivise prompt action by power distribution company (discom) officials, ensuring efficient project execution.

Manufacturing ramp-up: To meet the ambitious target of 30 GW capacity addition, there is a pressing need to ramp up domestic manufacturing facilities for solar cells and modules. This would reduce dependence on imports and drive down installation costs.

Awareness campaigns and workshops: Discoms should conduct extensive awareness campaigns and technical workshops to educate potential beneficiaries about the benefits of rooftop solar installations and the available support schemes.

Accessible financing: Nationalised banks should offer easy financing options with affordable interest rates for rooftop solar projects under the PM Suryodaya Yojana, facilitating broader access to capital for installation.

Provision of metres: Discoms should streamline the process of providing solar and net meters to reduce installation time and expedite project completion.

Simplified load extension process: In many cases, consumers find their electricity usage is lower than their rooftop solar system’s capacity, requiring load adjustment. However, this process, particularly with local utilities or discoms, is often cumbersome.

Even after completing paperwork and issuing load increase demands, consumers must wait for their next month’s bill, causing delays of two to three months. To expedite the process, discoms should promptly accept applications and issue necessary clearances based on accurate consumer data.

Waiver of feasibility studies: The Union Ministry of Power’s proposal to waive technical feasibility studies for rooftop solar projects up to 10 kilowatts (kW) should be universally adopted by Discoms to streamline the installation process.

In rural areas, effective implementation of rooftop solar (RTS) hinges on managing power outages. Residents, businesses, and industries encounter substantial difficulties due to frequent blackouts. Despite the expectation that grid-connected rooftop systems would serve as primary backup during outages, consumers often resort to diesel generators (DG) due to technical synchronisation requirements.

As a result, DGs become the primary backup source while RTS operates at a differential load. Restricting and controlling power outages is crucial for RTS to function optimally in rural regions. 

Recognising the need to accelerate rooftop solar adoption, the government has increased benchmark central financial assistance for residential sectors. Support for capacities up to 3 kW has been raised to Rs 18,000 per kW for general states and Rs 20,000 for special category states, aimed at covering the higher cost of solar panels and incentivising households to embrace solar energy.

Presently, there is no comprehensive central estimate of the households in India equipped with rooftop solar installations. What is evident is that, despite an expansion in installed solar capacity, the proliferation of rooftop solar installations has been notably restrained.

Conversations with various analysts by Down to Earth yielded no definitive figures, yet Delhi-based think tank Centre for Science and Environment (CSE) estimates have suggested the count of households with rooftop solar installations is less than 1 million.

Accelerating the adoption of rooftop solar installations is crucial for achieving India’s renewable energy targets and enhancing energy security. By addressing key challenges such as bureaucratic inefficiencies, financing constraints and manufacturing limitations, coupled with robust policy support and public awareness campaigns, India can unlock the vast potential of rooftop solar energy.

Analyses by multiple think tanks paint an optimistic picture for rooftop solar, especially with the Suryodaya Yojana poised to be a game changer. However, the ongoing decline in the market share of the operating expense model is a worrisome trend for RTS.

While Suryodaya Yojana seems highly ambitious at first glance, a high-level analysis indicates a win-win situation for both consumers and discoms. The scheme may help transition from freebie electricity distribution culture to making the power available at a very reasonable cost of generation at the point of consumption itself.

The interim budget 2024-24 by Finance Minister Nirmala Sitharaman on February 1, 2024 emphasised the importance of the scheme and its perceived impact in terms of energy security and access to affordable power.

As per our analysis, a rooftop system under the scheme of an average 1.5 kilowatt-peak (kWp) capacity will generate about 180 units monthly or 2,150 annually at a 25-year levelised cost of energy of Rs 1.3/kWh after adjusting the capital subsidy of Rs 18,000/kW.

This indicates a potential savings of Rs 6,000/year accrued from the utilisation of solar power generated at the point of consumption itself coupled with the sale of surplus power to the discom at a reasonable tariff of Rs 3/kWh.

This is considering an average household consumes about three units a day or about 1,100 units a year.  The scheme may also result in reaching about 15 million households with solar power.  However, scheme details are awaited with regards to further clarity on the following-

• A total initial capital requirement to connect 10 million households through rooftop systems would be the tune of Rs 52,000 crore for the average system capacity of 1.5kWp per household.
• The current subsidy structure can meet about 50 per cent of the initial capital cost. However, the balance will either be borne by the consumers or the scheme will have additional provisions to meet this capital requirement is yet to be ascertained. Apart from this, the scheme will require additional components such as meters (net or smart meter) to 10 million  households and revamping existing distribution system
• RTS consumers under the scheme will not necessarily have free electricity but at a much lower price, which over the long term will prove to help in moving away from the culture of freebies, especially with regards to electricity.

CSE’s recent publication highlighted the issues mentioned above and provided recommendations on similar lines to increase the coverage of residential rooftops under RTS, roping in discoms primarily and leading demand aggregation driven implementation. This would result in significant savings for discoms and the end consumer.

Subscribe to Daily Newsletter :

SUPPORT US

We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.