Context: A global study has found that India is the most cost-effective country for generating rooftop solar energy at $66 per megawatt-hour, while the cost in China is marginally higher at $68 per megawatt-hour.

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  • Due to the lower cost, rooftop solar photovoltaics (RTSPV) technology, such as roof-mounted solar panels used in homes, and commercial and industrial buildings, is currently the fastest deployable energy generation technology.
  • This is projected to fulfil up to 49% of the global electricity demand by 2050. 
  • According to the study, India has a significant solar rooftop potential of 1.7 petawatt-hour per year.

India’s recent achievements

  • India added 521 megawatts (MW) of rooftop solar capacity in the second quarter of the calendar year 2021.
  • It is a 53% increase quarter-on-quarter compared with 341 MW installed in Q1 2021 (January-March), according to Mercom India Research’s newly released Mercom India Rooftop Solar Market Report Q2 2021.
  • Rooftop solar installations were up 517% year-on-year (y-o-y) compared with the 85 MW installed in Q2 2020 (April-June 2020).
  • As per the report, installations were significantly higher than the previous quarter despite the second wave of the COVID-19 and related state lockdowns.

India’s Renewable targets

  • A target of installing 175 GW of renewable energy capacity by the year 2022 has been set, which includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power.
  • India has installed 31 GW of solar capacity, 17 GW is under construction and tenders for 35 GW have been floated.
  • The Government has set a target of installing 40 GW of grid-connected rooftop solar capacity in the country by the year 2022.
  • The central and state governments have embarked on initiatives like rooftop solar projects, solar parks, standalone mini-grids for rural electrification and off-grid applications such as solar cookers, lanterns, and others for producing maximum solar power in India.
  • Crisil report estimates that India will only be able to install 59 GW of solar capacity by 2022.

Challenges in increasing solar capacity

  • The Capacity Utilization Factor (CUF) of solar power projects is less than thermal, hydro, nuclear, wind and biomass power projects.
  • Delayed payments: Power distribution companies (discoms), which mostly are owned by state governments, have been delaying payments to plants supplying solar power. 
  • Weak investor sentiments: Public and private sector banks are reluctant to lend. 
    • Conditions to borrow from Centre-owned financial institutions like the Indian Renewable Energy Development Agency Ltd and the Power Finance Corporation are not conducive and foreign funds are difficult under current regulations.
    • Overall, the large-scale solar sector requires Rs 1,20,000 crore investment to meet its 60 GW large-scale capacity installment. (The remaining 40 GW is to be met by rooftop installations.)
  • Solar plants’ inability to run at full capacity: This is happening because discoms prefer to buy power from cheaper sources. 
    • This despite the Union government’s assurance that power produced by solar plants will be bought even if it is costlier.
  • Governments’ insistence that plants sell power to dicoms at unreasonably low tariffs.
  • Goods and services tax (GST): Since many projects were calculated without taking the tax into account, GST became an additional burden and turned the projects unviable.
    • Blocked reimbursements: State governments refused to pay and instead approached the Appellate Tribunal For Electricity. 
    • Improper tax provisions: GST tax solar projects assuming 30 percent of the sector’s cost as ‘services’ and 70 percent as ‘goods’. But ‘services’ are just 10 percent of what the sector does.
  • Additional import duty: In 2018, India also imposed a 25 percent duty on the import of solar cells and modules. This was done to give a boost to domestic manufacturers, but it only increased project costs.
  • Land acquisitions are a major worry for large-scale solar projects.

Advantages of Rooftop Solar panel installation

  • No additional land required: Rooftop solar offers certain advantages over large solar plants as no land and additional transmission capacity is required.
  • Transmission cost: it saves transmission and distribution losses, which are to the tune of 30 per cent. one unit energy generated by rooftop solar is equivalent to 1.4-unit energy generated from a large solar power plant considering 30 per cent of transmission and distribution losses.
  • Reducing cost: With decreasing prices of solar panel, the rooftop solar has become even more promising, it is now not only cheaper than commercial and industrial power. 
    • A one-kilowatt (kW) rooftop system can produce three to five units of electricity a day. 
    • Owners of the rooftop systems can also earn by supplying excess power to state-owned power distribution firms (discoms). 
    • The concept, known as “net metering,”
  • Energy access: Access to affordable power is a major issue for Indian households in both urban and rural areas. 
    • Renewable energy and in particular rooftop solar can greatly contribute to improving this situation.
    • Rooftop solar projects help in decreasing air pollutants that contribute to smog and acid rain and further cause serious health consequences including heart attacks and poor lung function.
  • Net-metering Net metering allows residential and commercial customers who generate their own electricity from solar power to sell the electricity they aren't using back into the grid. 
    • This billing mechanism credits solar energy system owners for the electricity they add to the grid. 
    • Each state has its own net metering mechanism as per the requirement.

Current challenges of the rooftop solar installation

  • Lack of clarity: the detailed approval process for rooftop solar plants, including net-metering billing, is not clear. 
    • Although the cost has been reduced, it is not less than the cost of conventional energy sources such as thermal power. 
    • Moreover, a residential building’s power consumption is charged at a lower rate than that of commercial and industrial buildings.
  • Financing: Although the cost of power production from solar power is very less, households lack easy access to capital for the purchase of equipment.
  • Net metering issue: The Net metering concept has found very little acceptability among the discus, as they are already financially stressed and it puts an additional burden on them. 
    • Also, only a few states have begun the actual implementation of the policy.
  • Consumer perception: there is a perception that it may not perform as expected over its lifetime. 
    • Additionally, there are trust issues as several entrepreneurs in the rooftop solar market are comparatively new with a little track record. 
    • Although progress in solar rooftop power is considerable, due to lack of major participation from households, the government target of 40 GW by 2022 will not be achieved and only 38% of the target will be achieved.
  • Cost of energy storage: as solar power can only be generated during the day time, it warrants energy storage to ensure continued usage at night time and the cost of battery storage per KW is significantly high.
  • Lack of information: One of the key barriers to installing rooftop solar systems is that they do not know who to contact to understand the processes to be followed and permissions required. 

Government initiatives Grid-Connected Rooftop Solar Programme

  • Government has recently approved the 2nd phase of the Grid Connected Rooftop Solar Programme. 
  • Program is mainly aimed at achieving the cumulative capacity of 40,000 MW from Rooftop Solar Projects by the year 2022 and will be implemented with the total central financial support of Rs.11,814 crore. 
  • Under the program, Central Financial Assistance (CFA) for the residential sector is available for
    • 40% for Rooftop Solar (RTS) Projects up to 3 kW capacity.
    • 20% for RTS system capacity beyond 3 kW and up to 10 kW.

India Rooftop Solar Market Outlook 2021

  • Many research and intelligence firms have predicted a bright future for the Indian rooftop solar market. 
  • Favorable government policies, tax benefits, incentives, and rising environmental concerns will be the driving factors for this industry’s rise. Here are some relevant statistics related to the Indian rooftop solar market. 
    • The Indian rooftop solar market is expected to grow at a CAGR of more than 25% for the next five years.
    • The industrial segment will dominate the market growth during this time, followed by the residential segment.
    • The share of the industrial segment has grown from 23% in 2015 to nearly 70% in 2019.
    • Maharashtra, Rajasthan, Tamil Nadu, Karnataka, and Gujarat are the five leading states in the rooftop solar power industry. These 5 states account for nearly 46 % of the total rooftop solar capacity in the country.
    • In 2020, the commercial & industrial sectors accounted for 4373 MW of energy, followed by 804 MW of the residential sector and 776 MW of the public sector.
    • Some reports have forecasted nearly 40% growth in rooftop installations year-over-year in 2022.

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