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Poor design of procurement schemes would hurt residential consumers


11 March 2020 | BRIDGE TO INDIA

Poor design of procurement schemes would hurt residential consumers

Karnataka and Delhi DISCOMs have recently issued empanelment tenders for installation of residential rooftop solar systems under MNRE’s phase II rooftop solar schemealso known as SRISTI. Including these two states, twelve states and union territories have so far issued such tenders. Six states and union territories have already completed empanelment process for a total capacity of 180 MW and obtained MNRE approval for subsidy funds.

  • DISCOMs are expected to aggregate demand, empanel installers and  monitor on-the-ground progress in residential rooftop solar market;
  • With empanelment process gaining speed, residential market should see rapid growth over next three years;
  • Procurement process needs to be re-tooled to achieve desired performance outcomes;
Under the new scheme, where MNRE provides 20-40% capital subsidies, DISCOMs are expected to assume responsibility for demand aggregation, empanelling installers, subsidy disbursement, installation monitoring, inspection and metering. The scheme guidelines mandate: i) use of domestically manufactured solar PV cells and modules, ii) minimum warranty of five years for all mechanical structures and equipment including inverters, net-meters and batteries, iii) commissioning period of 15 months, and iv) matching of L1 bids. The installers are also required to establish a service centre in each operational district. 
 
There has been a lull in government initiatives in rooftop solar since March 2019 when phase I scheme expired. With the new empanelment process, momentum is now building up and residential installations are expected to pick up rapidly over the next three years. 

Table: Salient details of state empanelment tenders for residential rooftop solar

Source: BRIDGE TO INDIA research
Note: Costs mentioned are total system costs pre-subsidy and include equipment procurement, transportation, insurance, installation, five year operations plus applicable fees and taxes.
 
Some states have specified very basic eligibility criteria. For instance, Andhra Pradesh requires minimum installation experience of only 50-100 kW. Other states have either specified no criteria or reserved part capacity for inexperienced installers. As a result, most of the empanelled vendors are little known local installers. And as often seen in India, high competition has resulted in price bids coming in at unrealistic levels and far below MNRE benchmark price (INR 48,000-59,000 for systems ranging in size from 1-10kW plus).
 
We fear that unless corrective action is taken expediently, lack of robust eligibility criteria and aggressive bidding would lead to poor quality installations and consumer dissatisfaction.
 

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