Gujarat and Kerala lead the way on residential rooftop solar

08 November 2020 |

Progress on MNRE’s residential rooftop solar policy phase 2, with a target capacity of 4,000 MW by March 2022, remains slow. The government has so far approved subsidy for 833 MW and disbursed only INR 240 million (USD 2.4 million) across the country. Progress has been held up by COVID-19, cancellation of tenders and aggressive bidding, amongst other factors. But Gujarat and Kerala have made more progress in comparison to other states with announcement of ambitious targets, large tenders and an attempt to tackle financing barrier, the biggest point of resistance for end consumers. As of October 2020, MNRE had sanctioned subsidy for 285 MW and 50 MW capacity for Gujarat and Kerala respectively (40% of total).

Table: Status of MNRE’s rooftop solar policy phase 2 until October 2020

Source : MNRE

Gujarat has announced a target of 800,000 home installations by December 2022. The state government has approved subsidy budget of INR 9.1 billion (USD 122 million) to top up subsidy available from MNRE. It is already the leading state by residential rooftop solar capacity in the country with total installation of 178 MW as on 31 March 2020 as per MNRE data. The state is also known for efficient net metering policy administration unlike most other states. The DISCOM officials are well trained, making timely inspection visits and approving applications within a few weeks of application.

Meanwhile, Kerala has emerged as one of the most attractive markets for installers and financiers due to its ambitious policy (rooftop solar capacity target of 500 MW by March 2022) and innovative scheme design. As the state has little potential for utility scale solar (fertile and expensive land) and relatively good stock of residential properties, it is focusing predominantly on rooftop solar for meeting its solar targets. The state DISCOM, KSEB, is acting as demand aggregator and investing itself in rooftop solar systems. End consumers are required to fund only 12-25% of total system cost and in return, they get to consume 25-50% of total power generated depending on their investment. Complete O&M responsibility over 25 years is retained by KSEB (passed on to bidders).

KSEB is aggregating demand through online registration by consumers. It received 278,000 applications and selected 42,500 rooftops for installation of 50 MW capacity, based on site surveys, under its first tender. The advanced registration and site examination process significantly reduces installation time and hassle for the contractors. The state has subsequently issued another tender for 150 MW capacity.

Both states have, however, struggled with their tender programmes. Gujarat issued a 600 MW tender, the largest such tender in the country, in July 2019. But only 430 MW was awarded at rates between INR 33,399-46,827 (USD 445-624)/ kWh 2020 with final allocation still pending. Timelines for another 600 MW tender, issued in February 2020, have been extended repeatedly because of COVID-19. Kerala’s 150 MW tender was cancelled and then re-issued in March 2020 with a change in business model. Final results are still awaited.

Gujarat and Kerala stand out for their serious intent to harness huge potential of the residential rooftop solar market. They also provide a good case study of how states can demonstrate leadership with innovative policies and efficient administration.

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