The outlook for residential rooftop solar in India


From pv magazine India

Household rooftop solar in India is seeing a gradual improvement after almost stagnant annual growth of 100-200 MW until fiscal year 2020, according to a report from consultant Bridge To India.

The document cites subsidies paid under a Ministry of New and Renewable Energy (MNRE) scheme as the main enabler for residential PV uptake.

The MNRE’s grid-connected rooftop solar program is aiming for residential installation of 4 GW by December next year. Now in its second phase, the scheme offers a 40% subsidy for the first 3 kW of generation capacity in rooftop systems and then a 20% subsidy up to a 10 kW ceiling. The program is being delivered at state level by electricity distribution companies.

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The Bridge to India report says the market outlook is also becoming positive due to a steady improvement in consumer awareness, affordability, financial viability, and financing options, as well as the entry of large organized solar installers.

“Free net metering in most states also strengthens [the] investment case for residential rooftop solar,” stated the report. “The average marginal tariff for a household with monthly consumption of 300 kWh in 15 states – accounting for 90% of [typical] residential consumption – is INR7.18/kWh ($0.096), effectively yielding an investment IRR [internal rate of return] of 8.3% for [a] 3 kW system.”

The study estimates the target market for domestic solar will hit around 52 million households by 2030 – 10% of urban independent households. Bridge to India forecasts residential PV generation capacity will reach 16.2 GW by 2030, under a medium scenario that assumes a 5% annual decline in system cost and a 3% annual fall in grid tariffs. That calculation took into account state-wise, bottom-up analysis of the market in view of prevailing grid tariffs, demographics, the number of independent houses, and the financial viability of residential solar.

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The report estimates India had installed 1,292 MW of residential rooftop PV as of June. That accounted for only 17% of total rooftop solar capacity – which can also include commercial and industrial arrays – and just 2.9% of the nation's total solar capacity.

Only around 0.4% of independent urban homes – 400,000 – have installed rooftop solar. The major deterrents have been consumer inhibition and low awareness about the technical, financial, and operational aspects of installations, according to Bridge to India.

Space at a premium

“Rooftop solar is not deemed as an essential purchase, because of improving … reliability of grid power,” stated the document. “A significant proportion of the urban, affluent population does not, also, have access to rooftop rights, or is unwilling to make a long-term cost commitment. Households attach a very high financial ([because of the potential] ability to expand the building vertically) and/or social value ([using the] space for leisure or games [and] utility needs) to rooftop [space], where available, restricting growth prospects.” 

A net capital cost – after the 40% upfront MNRE subsidy for sub-3 kW arrays – is currently estimated as INR32,000/kWp ($426), assuming a module cost of INR18.70/Wp ($0.249). That figure is within the affordability threshold of 67 million urban independent households, according to the consultant. However, added the report, cost increases, arising from more expensive panels; import duties including basic customs duty of 25% on cells and a 40% levy due from April; and a general sales tax set at 5-12%, could potentially dampen the rooftop market.

This copy was amended on 01/12/21 after Bridge to India changed its estimated net capital cost for MNRE-subsidized, sub-3 kW arrays from INR53,000/kWp ($706, at the exchange rate conversion made by pv magazine on 30/11/21) to INR32,000 ($426 by a conversion made on 01/12/21).

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