Several announcements, both at the central and at the state level have created lot of excitement at the Indian solar market. There is high level of confidence in the industry to achieve the fresh target of 100 GW by 2022 from the current capacity of 3 GW (as per the BRIDGE TO INDIA project database). The policymakers have made an attempt this time to support this expansion in terms of scope, targets and objectives. This reflects the intention of the government to mainstream renewables. As a part of this target, 30 GW has been earmarked to come from distributed generation from the current capacity of 285 MW.
The question lies in how India could do 30 GW of solar from distributed generation. Is there total dependence on government subsidy? What is the potential of rooftop solar in India? What are the potential game changers for the distributed solar market? BRIDGE OT INDIA believes that the theoretical potential of rooftop solar in India is over 132 GW by 2022, where cost effective storage solutions is likely to the industry game-changer. The support from government is mandatory to kick start the market, as the entire 30 GW cannot necessarily be built on government subsidy.
Until now, the Indian solar market has been dominated by utility scale projects comprising over 90% of the current 3 GW. We believe that a healthy distributed solar market will lead to a sustainable growth of the entire sector. However, first reaching scalein distributed generation is significantly more challenging than in utility scale projects.[1]
The definition of distributed systems will be crucial in achieving this target. Apart from rooftop projects, the government might include small ground mounted projects and micro grids under the distributed system category.
The potential for solar on India’s rooftops is huge. We estimate the realizable potential in the industrial and commercial segment at 62 GW and in the residential segment at 70 GW.[2]From this perspective India’s plan to install 30 GW is feasible.
Without government support, however, the growth in the Indian solar rooftop market will not be sufficient to reach the target. BRIDGE TO INDIA estimates that India could add only 1.5 GW of rooftop solar by 2018 without any government support, just based on commercial parity.[3]To accelerate adoption, the government needs to make solar more attractive.
Though the Ministry of New and Renewable Energy (MNRE) has in the past already offered subsidies for rooftop projects, only 36 MW out of the 285 MW (13%) of current projects have actually received it. Since the subsidy has not been available as widely and as quickly as needed, it has had an adverse effect and stalled the market development. Recent statements by Power Minister PiyushGoyal, clearly suggest that the ministry understands the shortcomings of the old system and is ready to provide a more supportive framework.
In addition, the government has to create a market for rooftop solar. The first step in this direction is consumer awareness. While the idea of generating power from solar is intuitively appealing in a country that suffers from heat and power cuts, very few consumers are actually knowledgeable enough about the pros and cons of solar to take a purchase decision. Especially residential consumers are largely unaware of the mechanism and uses of solar power. The government should support channels for consumer education.
A third aspect is clear and transparent grid rules: net-metering should be implemented across all states. Additionally, accelerated a depreciation benefit or tax credit could be made available to retail consumers for enhancing the viability of residential solar systems. The biggest impediment for adoption of solar power is the high up front cost. The government should extend priority sector status to solar installations to ensure easier access to consumer finance.
In most parts on India, the grid is unreliable. Only some urban, semi-urban and industrial areas enjoy continuous power supply. Grid-connected solar systems will not be able to penetrate into areas of lower power security unless they can provide a solid back-up solution. This could be achieved first in conjunction with diesel gensets. Later it would be achieved through cost-effective storage. This would be the real game-changer for the distributed solar market.
[1] Refer to our blog, “Utility scale projects are easiest to implement in India due to an existing track record”, http://bit.ly/1rSvVni
[2] Refer our report, “How should India drive its solar transformation? Beehives or Elephants”, http://bit.ly/Vq9pmR
[3] Refer our India Solar Rooftop Map 2015, http://bit.ly/1sUbqUK
Dr. Tobias Engelmeier founded BRIDGE TO INDIA in 2007, as a strategic environmental consulting company, based in New Delhi. Since then, his focus has been on developing strategic business models for international companies looking to enter the Indian solar market. Tobias has had a very strong affinity for India for a long time and feels that this is a very interesting time to be in this country, where enormous challenges meet with talent, technology and capital. He is deeply concerned about the resource use of this rapidly growing economy and believes in finding India-specific models to cope with this. He is the lead partner for the Technical University of Munich in a long-term research project on “Adapting Renewable Energy Products to the Indian Market”. Tobias is also very interested in governance structures in India and their impact on market developments. He regularly liaises with the key political decision-makers. Tobias was awarded a doctorate in political science from the South Asia Institute of the University of Heidelberg, Germany for his thesis on the relationship between identity and strategy in Indian politics. Prior to his doctorate, he worked for a leading strategic management consultancy. During that time, he advised large European utilities on how to engage with the fast-rising market for renewable energies.
Tobias.engelmeier@bridgetoindia.com
Twitter: @TEngelmeier