Rooftop solar needs a new policy paradigm

03 December 2018 |

BRIDGE TO INDIA has just completed the latest round of rooftop solar data compilation exercise. India added new rooftop solar capacity of 1,538 MW in the year ending September 2018, up a remarkable 75% over previous year. Total installed capacity is estimated to have reached 3,399 MW as on 30 September 2018.

  • Robust growth even in the face of safeguard duty and GST uncertainty reflects huge market potential of rooftop solar;
  • The government’s rooftop solar policy stance is outdated and lacking in vision;
  • Focus needs to evolve from reducing cost (capital subsidies, tax incentives and cheaper credit) to bolstering market confidence and tackling operational challenges;

We believe that 75% market growth in a year plagued by safeguard duty and GST uncertainty is absolutely fantastic. Ongoing fall in module prices should continue to drive growth in the next few years. The other notable aspect of market growth is that it has come despite rooftop solar policy stuck in a dead-end. The market has moved significantly in the last few years with rapid fall in capital cost, changes in business models and improved technical and operational experience of the industry. But government policy has hardly changed in the last few years. It remains predicated on capital subsidies, accelerated depreciation and an out-of-date net metering connectivity framework. There have been no new initiatives since announcement of the concessional credit scheme back in 2015. Inexplicably, there has been no progress on the promising proposals announced in December 2017. MNRE has even quietly scaled down the annual rooftop solar target for 2017-18 from 6,000 MW to 1,000 MW.

We think that lack of government policy initiative is a missed opportunity. Rooftop solar has huge growth potential and should be given more policy support particularly when utility scale solar is increasingly facing acute land and transmission connectivity challenges. Its share in total solar capacity addition has already gone up to 16% from 10% in three years. And we believe that this could go up to as high as 40% by 2022 in a strong policy support scenario.

The market is growing rapidly but still faces many hurdles. Concerns of DISCOMs, who see rooftop solar as a threat, need to be addressed through technical and financial support. The net metering policy framework needs an overhaul to accommodate new business models and do away with unnecessary caps on system sizes. Uptake of rooftop solar in residential and SME segments needs to be boosted by addressing poor consumer awareness and financing constraints.

Proactive government intervention can help in boosting growth and realising full potential of this compelling energy source.

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