Residential solar rooftop systems fail to shine in India

With over 300 million houses in India, over 300 days of sunshine a year, an ambitious target of 40 gigawatts of rooftop solar by 2020 and various states formulating rooftop solar policies, there should have been a solar revolution in Indian homes. Yet, the situation on the ground is quite different.

In the building sector, solar panels are primarily finding their way on the roofs of commercial, government and institutional buildings. Unfortunately, there has not been any major breakthrough in the residential sector. There are only a handful that have opted for rooftop solar energy in the cities despite high environmental awareness and access to technology and support.

In December 2015, the Indian government rolled out Rs 50 billion funding for 30% capital subsidy for rooftop solar installations to create a total capacity of 4.2 GW by 2020. But that has not made the power of natural light attractive enough for consumers or even for solar developers, who are largely focusing on commercial buildings and institutions.

“Suppose I want to install a solar rooftop of 10 KW [kilowatt] in my house, it can easily cost me up to Rs 1 million [$150,000]. Why should I be willing to spend so much? How will I get returns on my investment? It can take me 5 years-7 years,” Srinivas Krishnaswamy, chief executive of Vasudha Foundation, a clean energy think tank, told thethirdpole.net.

Currently, there are two ways through which an individual can install a rooftop solar system. They can choose the capital expenditure model by making an upfront payment. For those unwilling or unable to put up the money, there is the Renewable Energy Servicing Company model in which a terrace owner allows a solar developer to install a plant on the roof. The plant is installed, owned and run by the company or investor and the consumer pays for the cheaper power at around Rs 6-Rs 7 per unit compared with some Rs 9- Rs 10 per unit for conventional supply.

The RESCO model has the potential to bring about a solar rooftop revolution because it can tap into the terraces of owners who do not have the required capital. RESCO is popular among commercial buildings where business owners prefer to invest in the businesses instead of solar photovoltaic units.

The search for shade-free space

Currently, solar developers prefer investing in commercial buildings instead of private homes due to a number of reasons. The foremost is lack of space. A 10-KW solar plant that can power three air-conditioners and is sufficient for a three-bedroom apartment needs around 1,000 square feet of terrace area. Unlike in Europe and America, houses in India do not have standardised roofs and getting the required shade-free area is a big challenge. Besides, solar companies and financers do not want to invest in plants of less than 10 KW capacity under the RESCO model because it does not generate enough power to make profits.

Apart from this, most residents do not want to block their rooftops. They use the terraces for various purposes such as drying clothes, installing water tanks and split ACs.

To make rooftop space available, the solar plant can be installed on raised frames. For this, the Delhi government relaxed building norms in its rooftop solar policy, exempting people from taxes they would otherwise pay for raising a building’s height above the permissible limit.

However, raising structures inflates costs, making it less attractive to the investors. The Delhi government, in its policy, has tried to promote grouping of various houses, offices and commercial units to tackle both the lack of space and scarcity of net meters [that help consumers sell excess power to the grid as an incentive], but solar power companies do not want to get into the complexities of dealing with multiple residents or stakeholders for every power plant, unlike commercial units owned by a single company or individual.

In residential buildings, the ownership of the roof is also a knotty issue. It is often not clear if the terrace rights belong to the builder, the homeowner or the tenant. Many find dealing with residents welfare associations challenging because, unlike private companies, many RWAs do not maintain balance sheets and, therefore, do not qualify as subsidised consumers.

'What if a homeowner changes his mind?'

In the midst of all this, solar power developers have to worry about financial security when it comes to residences.

“I don’t see it [rooftop solar] happening in the next five years at least. The question is, who will pay for the power? Where is the financial security for a developer when it comes to residential solar rooftops? What happens in a case where we install solar on a rooftop and say after a year the resident refuses to pay? They are anyway getting power from the grid and what if they say you can uninstall and take back your system? How do you recover money in that? People can always change their minds,” Ved Prakash Goyal, an advisor to Applied Solar Power Management Pvt Ltd, which is part of the ENGIE group, the largest utility company in the world, told indiaclimatedialogue.net. “What if a new owner comes who doesn’t want to pay for solar.”

“The financial security should be provided to solar developers by the state-owned utilities. There is no mention of this in any of the solar policies notified by various state governments,” Goyal pointed out. “It is a question of changing mind-sets of people as well. Many have a fixed idea about how a façade of a building should look like and are not enthusiastic about installing solar panels.”

“In the residential sector, the large rooftops are the low hanging fruits. While there is a lot of potential, it needs a long-term clarity on how the electricity generated will be sent to the grid and how the home buyers will get the incentives,” Arunabha Ghosh, chief executive of Delhi-based think tank Council on Energy, Environment and Water, told indiaclimatedialogue.net.

In both the capital expenditure and RESCO models, the excess solar power generated on rooftops is supposed to be fed into the grid and purchased by state utilities. However, doubts are often raised on this because most power distribution companies in India are making losses.

“I don’t see it [rooftop solar] becoming a people’s movement yet, at least not in the near future. Even under the RESCO model, solar developers put lots of riders and conditions when they approach individuals. For instance, they don’t invest in plants less than 10 KW or 15 KW because, otherwise, they won’t make profits,” Ashutosh Dixit, chief executive of the United RWAs Joint Action, an association of around 2,500 RWAs in Delhi, told indiaclimatedialogue.net. “We can sensitise all the RWAs about rooftop solar so that it can be taken up on the individual level, but the government needs to help us with the resources to conduct these meetings.”

Silver lining

Despite the hurdles, there is a silver lining. According to Neeraj Kuldeep, research analyst at the Council on Energy, Environment and Water, while the capital expenditure model is dominating in the rooftop segment with almost 85% of total solar installations, the RESCO model in the rooftop solar segment in India, with positive rooftop policy support across many states, is getting traction and showing a year-on-year growth of 150%.

There is a handful of rooftop solar developers catering to the residential sector under the RESCO model. One of them is Jaipur-based Ray Power Infrastructure, which has installed 55 KW-60 KW of solar rooftop power in the residential sector, but this amounts to only six homes in Jaipur. It’s adding two homes in Delhi. Another company, 8Minutes, has installed rooftop solar plants in 10-15 Delhi homes.

“It [rooftop solar] is very doable. Often, solar developers go for big-ticket projects in the commercial sector but this is where we are trying to fill the gap. Often, we find that people who have spaces don’t have the money, while those who have the money don’t have adequate space. So, we try to find solutions to help them go solar. Also, we have seen the cost of power drop by 90% through rooftop solar installed in homes. And this is a huge saving on power bills,” Arjun Shrihari, co-founder of 8Minutes, told thethirdpole.net, “It is all about sensitising people.”

This article first appeared on The Third Pole.