Weekly Update: Andhra Pradesh set to purchase solar power from rooftops of end-consumers, viability remains a concern

Last week, the Andhra Pradesh government announced that it will buy power from rooftop PV systems installed on residential and commercial buildings in the state at a fixed tariff of INR 3.5/kWh (refer).

Capital subsidies of 30% is offered by the MNRE and 20% is offered by the Andhra Pradesh state government
Both residential and commercial consumers will require further subsidies for solar to be financially viable
Providing reliable information on rooftop potential and easily accessible, low-cost financing as well as waiving state level taxes for solar PV systems are steps that can be taken by the government to increase viability

The state expects the consumers to take advantage of the 30% capital subsidy offered by the MNRE for rooftop projects (currently on hold, but expected to be available again by early July 2013 for 200 MW of projects annually across the country under Phase 2 of the National Solar Mission). An additional capital subsidy of 20% will also be offered by the state.

Based on an analysis of Delhi’s rooftop potential (refer), accounting for obstructions and shadowing on the roofs, we estimate that typical residential buildings usually have solar suitable rooftop space of at least 40-300 sq. meters, accommodating at least 5 kW of PV. The LCOE of a 5 kW PV system for residential consumers with a cumulative 50% subsidy (MNRE + State) is approx. INR 6/kWh (depending on on-site irradiation). Residential consumers need an additional INR 2.5/kWh from the government for solar to be financially viable for them.

Commercial consumers typically have solar suitable space of 2,400 sq. meters and more, accommodating upwards of 200 kW of PV. The LCOE of a 200 kW PV system with the 50% subsidy is approx. INR 4/kWh. Despite the significantly lower LCOE owing to larger system sizes, commercial consumers need an additional INR 0.5/kWh for solar to be viable.

It is important to note that the solar LCOE is unviable even though we have considered a system cost of INR 120,000 per kW which is lower than the Andhra Pradesh government’s benchmark of INR 160,000-180,000 per kW.

The Andhra Pradesh government’s goal of using rooftop solar power to bridge its power deficit could be a non-starter if the government does not meet the basic viability criteria for the consumers. The Gandhinagar Rooftop Program, offering a feed-in-tariff of INR 11.21/kWh to Azure Power and INR 11.78/kWh to Avantha Solar, is set to complete 1.3 MW of installations (refer) and should be taken as a benchmark. Rooftop solar for end-consumers faces additional challenges of a lack of reliable information on rooftop potential and easily accessible, low-cost financing which also need to be addressed by the government. The government could also consider waiving state level taxes for solar PV systems to improve viability.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

What are your thoughts? Leave a comment below.