December 2020

Commercial and industrial (C&I) users consume approximately 49 per cent of the electricity generated in India. They account for 70-80 per cent of the country’s rooftop solar installations and now, increasingly, they are making headway in the utility-scale solar segment as well, through the open access and group captive routes. According to a recent report by IEEFA, India’s new onsite rooftop solar capacity in the C&I segment is estimated to be in the range of 0.8 GW to 1.2 GW in 2020, which is significant given the ongoing Covid-19 crisis.

Increasing electricity demand and grid tariffs for C&I customers are the key factors driving commercial users to move to solar power, which is not only cleaner and cheaper, but also ensures tariff certainty for up to 25 years. Realising the cost benefits of solar over conventional power, a large number of MSMEs are entering the market.

Meanwhile, the payback period for solar projects is gradually shortening with the declining cost of equipment. In the rooftop solar space, returns can be realised within three to four years under the capex model. For an opex project, the tariff rate is around Rs 3.50-Rs 4 per kWh, which is less than half the average C&I grid tariffs prevailing across most states.

The next revolution in the solar power segment will be in the storage space. In the rooftop segment, C&I consumers will be the first to adopt the solar plus storage model. Some pilots have already been tested and many large industrial and commercial users are undertaking storage trials. Meanwhile, technical advances such as higher generation efficiency from bifacial mono-PERC modules, which need less rooftop space, will define the future growth of this market.

Clearly, there are plenty of opportunities in the C&I solar segment, but several issues must be tackled to speed up its growth. These include difficulty in project financing, especially for MSME players, policy ambiguity regarding net metering implementation, regulatory uncertainty on open access and cross-subsidy surcharges, and ineffective grid integration of these plants. The impact of the growing C&I solar capacity on

utility financials and infrastructure also needs to be handled more carefully.

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