Rooftop solar market in India is expected to add new capacity of 700 MW in 2016 – 15% of total solar capacity addition this year – crossing 1 GW cumulative capacity by September and growing at a sizzling 300% over last year. Significant capacity is expected to be added in the commercial and industrial segment as commissioning before the end of this month will allow investors to claim 80% accelerated depreciation (AD). The Ministry of Finance has reduced depreciation rate under the AD policy to 40% from April 2017 but more importantly, it is not yet clear if the AD benefit will be available for solar projects after this date.

• Rooftop solar in India has maintained a 10-12% share of the total solar capacity addition, which is much lower than other peer markets
• Private sector, primarily commercial and industrial customers, are leading the demand growth but government sector is also looking very promising
• MNRE and various state renewable agencies are finally beginning to address key market challenges helping to unlock the market potential

Historically, rooftop solar has maintained a 10-12% share of overall solar capacity addition in India. This is much lower than other key markets such as US (46%), Germany (73%), China (18%) and Australia (97%). The Indian government wants to improve this share to 40% (or 40 GW) by 2022.

Potential removal of AD and 10-year tax holiday benefits from next year coupled with clarity on status of financial subsidies, improving economics of rooftop solar and implementation of net-metering are driving rapid growth in the rooftop market. While bulk of the demand is coming from private sector, the government is also helping by creating substantial demand in the public sector, where MNRE is providing subsidy of 25% for government buildings and giving stiff targets to government departments for rooftop adoption. Several government departments have carried out an assessment and recently provided commitments to install 1.5 GW of rooftop solar capacity. Solar Energy Corporation of India (SECI) has already announced a scheme for allocating 1,000 MW of rooftop solar capacity on various government buildings.

There are multiple other initiatives in planning stages to support the rooftop solar market. MNRE has recently published a framework technical regulation to ensure quality of equipment supply (refer). We understand that the Ministry of Power may shortly announce a financial support package to distribution utilities for implementation of rooftop solar in their jurisdiction. A lot of work is also going into making the net metering policies more effective.

BRIDGE TO INDIA believes that the high growth phase of India’s rooftop solar market has only just begun. This market has got a great potential and it is very encouraging to see the government addressing some of the key challenges.