While India’s uptake of ground-mounted solar projects is impressive, progress in the rooftop solar space has been limited. Madhya Pradesh has done pioneering work in the rooftop space, which has been lauded by several stakeholders. NITI Aayog has decided to replicate Madhya Pradesh’s rooftop projects under an initiative titled “Sun’s Blessings and Health (SuBaH)”, to set up rooftop solar projects for health institutions. SuBaH will provide inexpensive green power to government health institutions, and play a big role in reducing their overall expenditure. The features of the Madhya Pradesh model that this initiative plans to replicate are as follows…
Madhya Pradesh model
The RESCO model has been successfully implemented in Madhya Pradesh, and over a hundred rooftop projects are functioning – all set up without any investment by beneficiaries, enabling savings for beneficiaries from day one. This includes central government organisations, IIM-Indore and substations under the Central Academy of Police Training and Power Grid Corporation of India Limited, as well as numerous state government organisations such as colleges, police stations, medical colleges and universities. IIM-Indore, till date, has saved Rs 10 million in electricity costs – almost Rs 350,000 per month. Meanwhile, medical colleges – which made zero investments – have saved almost Rs 2 million per month and over Rs 40 million in total. The tariff rates achieved in Madhya Pradesh were by far the lowest in India – Re 1.38 per unit (with 3 per cent annual escalation). This was with the then available subsidy of 25 per cent from the Ministry of New and Renewable Energy, and 18 per cent from the Madhya Pradesh government.
Risk mitigation strategies
The participation of developers in these projects, and improvements in tariff attractiveness, have been achieved by mitigating risks and uncertainties for developers. This has been accomplished through numerous innovations, robust project preparation, an efficient transaction structure, balanced risk allocation and careful contractual terms. Usually, in RESCO tenders, the marketing exercise is left to developers. In Madhya Pradesh, various government departments were convinced of the RESCO model and pre-clearance was obtained on power purchase agreement documents. This saved bidders from spending their resources on identifying procurers, and reduced project uncertainty. Moreover, a data room was created to address information asymmetry. This included information such as Google coordinates of buildings, indicative solar photovoltaic array layouts superimposed on Google images, and electricity consumption history. The bidders even knew the number of panels and inverters, and the length of cable, needed to implement the project. The data room was developed with technical assistance from the World Bank. The development of the data room greatly reduced the risk profile of the projects and enabled more informed bid participation, leading to low bid rates. To reduce payment security risk, it was provided that the procurer or procurer’s administrative department shall provide payment security through a letter of credit, bank guarantee, fixed deposit or government guarantee/ zassurance. Multiple pre-bid meetings were conducted, where extensive pre-bid consultations were held with prospective bidders. Many of the suggestions from the bidders were accepted, and the necessary modifications were made in the project documents.
The way forward
A key concern in the rooftop space is that several state governments have regulations that discourage its uptake. In addition, under the Electricity (Rights of Consumers) 2020 rules, net metering can be set up by a prosumer only for loads up to 500 kW or up to the sanctioned load, whichever is lower. For loads beyond 500 kW, gross metering must be used. Madhya Pradesh and other states used to have a net metering ceiling of 1 MW; however, the Electricity (Rights of Consumers) 2020 rules have nudged several of them, including Madhya Pradesh, to retrogress and decrease the ceiling to 500 kW. It is important to note that many consumers have already set up 500 kW rooftop projects, but their demand is much higher – over 2 MW. These consumers cannot opt for net metering beyond 500 kW. To solve this issue, the state is developing a “No Export Model”. Under this, a larger system can be used but the electricity generated cannot be exported. The additional electricity may be stored or wasted. However, the net metering and no-export models will not be able to co-exist. Opting for the former means that the latter will have to be given up. n
Based on a presentation by Manu Srivastava, Principal Secretary, Technical Education, Skill Development & Employment Department, Government of Madhya Pradesh at Renewable Watch’s 16th Solar Power in India conference.