India will likely see a record growth of new solar installations in the next few years, with the the rooftop solar segment for the first time contributing significantly, according to a new report by Delhi-based consultancy group Bridge to India.
The key market drivers are grid and diesel parity as well as the net metering policies being announced in several states, according to the firm. "The rooftop solar market is still at a nascent stage with a very diverse set of participants and exciting dynamics," Bridge to India says, adding, "The need of the hour was to map it."
According to the group’s first ever India Rooftop Solar Map, the industrial and commercial rooftop solar segment accounts for 60% of the total rooftop market in India. "The market is still highly fragmented with hundreds of small installers offering their services," Bridge to India observes, adding that the list of Ministry of New and Renewable Energy (MNRE) channel partners alone encompasses 234 companies. However, larger players are gaining ground.
With 15%, Tata Power remains the current market leader. Solar power is already an attractive choice in relation to grid power for commercial customers in 13 states and for industrial customers in 12 states. Bridge to India expects the fastest expansion in the industrial rooftop segment with an annual growth rate of 133% until 2018.
Residential solar market will follow later
The residential solar market is even more fragmented than the industrial and commercial market. With a total installed capacity of 112 MW, the segment is more driven by the need for power and a desire to have energy independence or green power than it is by underlying commercial benefits, according to the report.
"The rooftop market presents a vast opportunity," says Tobias Engelmeier, founder and director of Bridge to India. "The potential in India is easily in excess of 100 GW. So far, only a tiny fraction of this opportunity has been tapped. As the economics of electricity will continue to shift in favor of local solar solutions, I am convinced that we will see phenomenal growth in the next five years."
Engelmeier points out that across India, only 13% of the projects have actually received the MNRE subsidy, which he says only serves to delay decision making by potential customers in its current form. "It should be fundamentally reformed or abolished," Engelmeier argues.
"For many industrial and commercial consumers, solar is already viable without a subsidy. Based on our market model, we project that the Indian rooftop solar market will reach 1.5 GW of cumulative installed capacity by 2018. This is a fast growth from the current 285 MW, but still only a fraction of the potential."
Engelmeier says that in order to accelerate the market even further, the "government should announce better incentive mechanisms to ensure quality of installations, additionally a plant performance linked incentive such as generation based incentive (GBI) can be deliberated."
The Bridge to India director says the MNRE could also revamp the accelerated depreciation benefit by decoupling the tax incentive from investment in the same way that a carbon credit or a renewable energy certificate can be traded independently of the power output. "Then, the tax benefit could be generated by one party (say, a professional rooftop investor) and sold to another party that wants to use it to reduce its tax burden. This approach has been very successful in the U.S. It helps transform the market from one driven by one-off investors into one driven by institutional capital, where professional approach, competition and reasonable return expectations help make rooftop solar power a scalable business and a mainstream choice for end-customers."