India's Rooftop Solar Capacity to Hit Record 4GW
India's rooftop solar sector is brimming with vitality, surmounting significant obstacles, and poised to achieve an unprecedented 4 gigawatts (GW) of capacity in the fiscal year 2024, according to a joint report by the Institute for Energy Economics and Financial Analysis and JMK Research & Analytics.
The report underscores that the period between April and July 2023 witnessed a capacity increase of nearly 2GW, only slightly less than what was added in FY2023. The decreasing costs of solar modules are anticipated to sustain this growth trend in the short-to-medium term.
Vibhuti Garg, Director, South Asia, IEEFA, one of the report's co-authors, emphasises the vital role that solar, encompassing utility-scale, rooftop, and open-access verticals, must play for India to reach its ambitious goal of 500GW of renewable energy by 2030.
Garg also points to countries like Germany and Australia, which have demonstrated the transformative potential of rooftop solar with the right policy and regulatory framework.
Despite the recent surge, the report identifies substantial regulatory hurdles in the rooftop solar market. Jyoti Gulia, Founder of JMK Research, notes that regulatory uncertainties and limited support from local electricity distribution companies (DISCOMs) have compelled prominent developers to shift their focus elsewhere or exit the rooftop solar sector.
Among Indian states, Gujarat, Andhra Pradesh, Telangana, and the union territory of Delhi stand out as having the most conducive environments for commercial and industrial (C&I) customers looking to establish rooftop solar projects. Nevertheless, the report stresses the need for several other states to embrace rooftop solar.
The transition from net metering to less advantageous gross metering and net billing arrangements in some states has prompted C&I consumers to explore alternative green energy options like open access.
Kapil Gupta, Manager at JMK Research, highlights the importance of off-site open access for C&I consumers, especially in states like Uttar Pradesh and Tamil Nadu, where net metering restrictions are in place.
The report puts forward recommendations for policymakers, including the establishment of distinct renewable purchase obligations for rooftop solar to stimulate the market. Additionally, states should permit behind-the-meter rooftop solar systems to aid DISCOMs in forecasting their load schedules. Finally, uniform regulatory provisions, akin to the Green Open Access Rules, should be issued by the central government.
Meanwhile, the micro, small, and medium enterprises (MSME) sector emerges as a promising growth area for rooftop solar. Recent improvements in rooftop solar financing for MSMEs, as lenders recognise the segment's potential and tailor products to its requirements, have been instrumental. The World Bank is expected to announce a credit guarantee mechanism this year, which could provide a significant boost to financing for MSME rooftop solar projects.
Prabhakar Sharma, Consultant at JMK Research, anticipates that the next phase of growth in the rooftop solar market will stem from this segment. The report recommends stringent enforcement of solar procurement targets to expedite rooftop solutions for MSMEs.
Moreover, the report highlights the advantages of embracing battery energy storage systems (BESS), virtual net metering, and peer-to-peer trading to bolster the rooftop solar market. Kapil Gupta suggests that coupling rooftop solar with BESS for C&I customers will become economically more viable as states introduce Time of Day pricing.
Furthermore, innovative business models like virtual net metering and P2P trading can benefit consumers and DISCOMs alike. Sharma explains that virtual net metering enables consumers at different locations to aggregate and source rooftop solar power from a single, large solar plant, increasing access to financing. P2P trading allows consumers in the same DISCOM jurisdiction to trade surplus solar power, reducing distribution losses and opening new revenue streams for DISCOMs through charges for energy traded in P2P transactions.
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