Interview with Arvind Karandikar

“Residential rooftop growth has not been as expected”

The installed rooftop solar capacity in India stands at around 3.4 GW. Of this,  the residential segment accounts for a mere 521 MW. This is insignificant given the huge potential in this segment. In an interview with Renewable Watch, Arvind Karandikar, director, Nexus Energytech, a Pune-based consultancy company, talks about the current status of the residential rooftop segment, challenges in scaling up capacity, issues with different business models, the impact of the net metering regulations and the outlook for the segment…

What is the current status of the residential rooftop solar segment?

In the residential rooftop segment, the growth has not been as expected. This is mainly due to three reasons. One, there is a lack of awareness among residential consumers. Second, the procedure to get approvals from various organisations including discoms is very long and tedious. Third, there are a large number of entrepreneurs in the market. These entrepreneurs provide various offers to residential consumers. Consumers interested in installing a rooftop project are not able to decide which offer is best for them, and which developer will be able to provide good performance over the years.

In fact, even the entrepreneurs are not really conversant with new technologies and their performance. The competition in the market is not about providing better technology, but setting up the project at the least cost. This is worrisome.

What is your opinion on the O&M of the residential rooftop projects?

There is no doubt that there are issues pertaining to operations and maintenance (O&M) of these projects. These can be attributed to three things. One, while deciding the layout, structure and location of the plant, the O&M aspect is not thought through. Two, residential consumers have the habit of ignoring the O&M aspect of solar installation. Three, it is still not economically viable to have a contract with a third-party agent for O&M. Therefore, the consumers end up doing the cleaning part themselves. The cleaning of solar modules is neither easy nor a priority for residential consumers, which adversely affects the performance of the solar system.

What are the challenges specific to the residential rooftop segment?

One particular issue with the residential rooftop segment is that the system size is small, and setting up small projects can be expensive for these consumers. This is not the case with commercial and industrial consumers looking to set up rooftop solar projects. For smaller systems with higher per watt-peak, the payback period is not very attractive. Another challenge particular to the residential segment is that many households want to use their terrace and therefore do not want to accommodate solar systems. If they go for a raised structure to accommodate the solar system, the cost increases substantially, making the installation unviable. Moreover, the cost of solar modules does not make much of a difference, but the added cost of inverters and module structures raises the cost of the entire rooftop system, which is enough to disincentivise residential consumers.

What steps need to be taken to address these issues? 

The issue of lack of awareness among consumers needs to be addressed either at the central or the state level. The initiative should come from the Ministry of New and Renewable Energy (MNRE), which needs to be followed up by the industry. For awareness, social media can be widely used. However, the issue is that the rooftop market is very spread out with individual capacities of 1-5 kW. As the profitability from each project is very low, the entrepreneurs have no incentive to go for a large scale awareness campaign. In the end, only those consumers end up installing solar projects who know about the technology and are passionate about shifting to clean energy. The consumers approach the entrepreneurs and the role of the entrepreneur is just reactive. This has to change. And this can only be changed by running a large national campaign. The MNRE is thinking of such a campaign but nothing has materialised as of now.

In the residential segment, for project sizes less than 10 kW, there is still a need for subsidies. These consumers visit the websites of state nodal agencies and social media to enquire about the relevant subsidies available. However, there are no such subsidies available. This creates a lot of confusion and the consumers end up scrapping their plans of setting up rooftop projects. Hence, clarity over the availability of subsidies will go a long way in promoting uptake in the residential rooftop segment.

What is the right business model for the residential rooftop market?  

I believe that in the residential solar segment, the opex model has certain issues. The recovery of money from consumers is a major concern for developers. So, unless the discoms adopt the opex model, these issues cannot be resolved. That is, either discoms should become the developers or should take the responsibility of recovery of money from the consumers. This is quite feasible as discoms have control over the bill payments of residential consumers. Unless this happens, the opex model will continue to have limited future in the residential market. Until then, the capex model will be preferred. This does not mean that there are no issues attached with the capex model. For this model, high upfront investments are required and consumers feel the need to take loans from banks. But the experience of such a framework is not that great. The bankers and consumers are still not aware of such a facility.

Thus, a new business model is needed given the inherent issues with the opex model and the low probability of receiving loans in the capex model.

Have the net metering regulations proved effective?  

The net metering regulations are now available in more than 20 states. It has become a common regulation now. However, these regulations alone will not translate into the growth of the residential rooftop market. Even today, the readiness of discoms to set up net meters is an issue. By readiness, I do not mean only the implementation of regulations, but also the adoption of procedures by discoms and awareness about net meters. It is important for engineers who interact with consumers to have awareness about net meters. The awareness is still not there and this issue is being addressed. This is, however, happening slowly and will take some time.

In states like Uttar Pradesh and Karnataka, the discoms are moving away from net metering to gross metering. So, there is uncertainty regarding the continuity of such regulations and the information reaching the end consumer.

What is your outlook for the residential rooftop segment in India?

The capacity addition projections for the next year do not give us a very motivating picture. This is because the states are confused whether to go with net metering or gross metering, whereas consumers are confused about the availability of subsidies and loans. These issues will take a year or two to settle down. But in the next five years, we can expect exponential growth to take place. We need to appreciate that cross subsidisation for residential consumers is going to reduce.

As a result, tariffs will go up. In this scenario, solar systems will become more and more attractive. In addition, more entrepreneurs are going to enter the market, bringing in newer technologies. Both of these developments are going to make sure that the growth of the residential market remains substantial provided the discoms play a greater role in such installations.

In my opinion, it is quite difficult to achieve the 40 GW rooftop target by 2022. However, once all the issues discussed are addressed, substantial growth in rooftop installations will take place and by 2025, the country will be able to achieve the desired target. But I am sceptical about the country achieving the 40 GW target by 2022.

 

GET FREE ACCESS TO OUR ARTICLES

Enter your email address