Analysis: More needed from Indian government to fulfill 40 GW rooftop solar ambitions

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At the end of the year, India’s Cabinet Committee on Economic Affairs (CCEA) announced it had upped its budget for rooftop solar PV deployment, from INR 6 billion (around $90.2 million) to INR 50 billion (around $751.8 million) up until 2019-20, in the form of a 30% subsidy.

Intended to kick-start the sector, the hope is the subsidy will fund 4.2 GW of grid connected rooftop solar PV systems over the next five years in the residential, government, social and institutional sectors. It is expected commercial and industrial rooftop installations will take off on their own, without the subsidy, but with the help of other benefits. According to the government, the official growth map looks as such:

Year

Rooftop solar PV capacity (MW)

2015-16

200

2016-17

4,800

2017-18

5,000

2018-19

6,000

2019-20

7,000

2020-21

8,000

2021-22

9,000

Total

40,000

More needed

Speaking to pv magazine, Mercom Capital Group and Bridge to India believe, based on the current budget and policies and regulations in place, the targets are "overly optimistic" and "very ambitious." They agree that in order to increase installed capacity of solar PV on rooftops from current levels to 40 GW in 2020, a lot more needs to be done.

"This is the government being overly optimistic if it thinks it can develop a 40 GW market by spending less than a billion dollars," Raj Prabhu, CEO and co-founder of Mercom comments. "We are hoping that the government will increase the budget as it begins to run out of the allocated Rs.5,000 crores [around US$751.8 million]."

Jasmeet Khurana, associate director – consulting at Bridge to India adds, "We believe that the rooftop solar targets are very ambitious and the current policy push, including this new decision, would likely fall short. A lot more is expected from both the central and the state governments for India’s rooftop solar capacity to reach anywhere close to the 40 GW target by 2022."

Impressive growth still expected

Despite the criticism, Bridge to India’s Khurana calculates the new subsidy scheme will result in "substantial growth" in the short-term, with the sector expected to grow at a CAGR of between 60 to 70% over the next four to five years. Beyond this, the market needs "a very strong concerted effort from the government on policy and regulatory front to achieve its growth potential in a sustainable manner," he says.

Khurana goes on to say that, based on past experiences, the two key issues are: how will the scheme work; and will it be effective. In a positive move, he points out that the biggest change introduced is how the funds will be distributed. Instead of going through Ministry of New and Renewable Energy (MNRE) "channel partners," funds will be made available through three different channels: the Solar Energy Corporation of India (SECI); schemes run by state governments; and subsidy disbursements through financial institutions. CCEA approval is also seen as encouraging.

"SECI is already believed to be in the process of allocating subsidy for 750 MW of rooftop capacity to systems aggregators and EPC contractors. The states are also likely to follow a similar aggregated capacity allocation route. Another important mode for subsidy disbursement is going to be through financial institutions. MNRE is likely to provide an in-principle approval to the State Bank of India to disburse subsidies. These disbursements will be clubbed with the rooftop solar loan schemes of the bank," he explains.

Although they are not part of the subsidy scheme, commercial and industrial rooftop solar PV installations are also expected to experience "significant" growth over the next six to 12 months. "As the subsidy disbursement mechanisms for the residential market would primarily be taken up by states and financial institutions, it may take up to a year for the mechanisms to become operational," concludes Khurana.