Policies

Similar to MW Scale power generation, rooftop based solar power generation also is to a considerable extent driven by policies.
The key policies that have been driving this sector so far are

Capital Subsidies

Net Metering

Capital Subsidies

In the case of rooftop solar, there have been two types of capital subsidies – from the centre and from the states.
Central capital subsidies, where the central government subsidises through MNRE the upfront capital cost for a rooftop solar power plant, had been a driver for rooftop solar power plants until 2014.
However, two aspects made this a far less powerful tool:

One, owing to a number of reasons, the subsidies took a long time in reaching those putting up these rooftop solar power plants, making people lose confidence in the scheme

MNRE itself suggested early 2015 that they intend to make these subsidies quite selective, and will also decrease the subsidy from 30% to 15%

Solar Mango does not expect central capital subsidies to play a significant role in the growth of rooftop solar segment in India any longer.
Of late, some states have announced capital subsidies of their own, on top of the central capital subsidies. Notable among these are subsidy announcements from Tamil Nadu and Andhra Pradesh, each of which had announced a Rs 20,000/kW subsidy for the residential rooftop solar sector. It is too early to judge the effectiveness of this subsidy, but based on interactions Solar Mango has had with the stakeholders, it appears that this subsidy is being implemented better than those of the centre.

Net Metering

Net Metering, a concept that enables surplus power from a rooftop solar power plant to be exported to the grid and getting monetised, can be a powerful driver for rooftop solar power, especially industrial and commercial rooftop solar.
This is so because industrial and commercial buildings could have 100s of kW of rooftop solar installed; while they might use most of the solar power generated during weekdays, companies that do not work during weekends could lose out on tens of thousands of units solar power per year.
Net Metering ensures that these extra units get their due credit, and thus makes rooftop solar a more economically feasible concept for these enterprises.

Unreliable Grid Power Supply

India suffers from a power deficit of 9-10% of peak demand, which has resulted in poor power quality and productivity losses for businesses. It is estimated that industries in Andhra Pradesh alone have suffered losses of Rs. 30,000 Cr between September 2012 and April 2013 due to the power crisis. The power shortages comprise
a.Peak power deficit (MWs of capacity)

India’s overall peak power deficit in 2012 was 9.4%

Southern states had the maximum deficit of nearly 18.0%

Northern regions of the country suffered a deficit of 8.9

b.Energy deficit (MWhs of energy generated)

India’s overall energy deficit in 2012 stood at 8.7%

Southern states experienced the highest deficit of 15%

The power deficits are caused by

Non availability of fossil fuels at acceptable rates

Decreasing financial health of the State DISCOMS

Delay in commissioning of power projects

The issues surrounding each of these are complex, and are not likely to be resolved immediately. We expect the power deficit to continue in the 8-9% region for the foreseeable future. This shortage of power has significant ramifications for both businesses and residences.

Grid & Diesel Power Cost

Grid power cost is an important driver for the growth of rooftop solar power. While there is a niche segment that installs solar power on their rooftops out of a sense of environmental consciousness, a large percentage of rooftop solar installations in India – be it for residential or for commercial – will not happen unless there is a strong business and economic case for that.
This brings us to the concept of grid parity, which is a status when the cost of solar power is that same as that of grid power.
As we can see, when there is grid parity for rooftop solar, the use of rooftop solar will accelerate, as beyond this point, solar power can only cost less (as solar panels’ cost keep decreasing and the cost of fuel is free) while grid power can only increase (as it uses costly fossil fuels whose general trend will be increase in prices, though there could be temporary dips in the fossil fuel prices as it has happened since Nov 2014.

Cost of Power

Rooftop solar power costs about Rs. 7.0/kWh and is a cost-effective alternative for energy consumers where

The grid tariff is higher than the levelised cost of solar power

Levelised cost calculated as the cost per unit of power generated, taking into account all costs incurred over the lifetime of the plant adjusted for time value of money.

Diesel generators are frequently used

The depreciation on the solar plant (at 80%) can be claimed against taxable profits

Grid Tariffs in Indian Cities for Industrial, Commercial, and Residential consumers

The below table gives a comparison of grid tariffs for different categories of consumers across 5 Indian cities:

Table : Sample State-City grid tariff comparison (Rs. /kWh)

Industrial/Commercial

Residential

State-City

Category

Industrial Tariff

Commercial Tariff

Consumption

Tariff

Andhra Pradesh – Hyderabad

11 kV

7.42

7.42

33 kV

6.77

6.77

132+ kV

6.51

6.51

50 kWh

2.01

200 kWh

4.33

400 kWh

5.72

600 kWh

6.54

Gujarat – Ahmedabad

500 kVa

4.67

4.37

500-2,500 kVa

5.00

4.70

> 2,500 kVa

5.10

4.80

50 kWh

4.92

200 kWh

4.61

300 kWh

4.89

Karnataka – Bangalore

1-1,00,000 kWh

5.75

1-30 kWh

8.40

>1,00,000 kWh

6.15

31-100 kWh

5.24

1-2,00,000 kWh

7.35

101-200 kWh

5.17

>2,00,000 kWh

7.65

201+ kWh

5.49

Maharashtra – Mumbai

Express feeder

7.32

11.91

Non Express feeder

6.58

11.18

Seasonal

8.17

100 kWh

5.65

300 kWh

5.44

500 kWh

7.10

600 kWh

7.07

Tamil Nadu – Chennai

5.98

7.61

99 kWh

1.30

199 kWh

1.70

499 kWh

2.76

600 kWh

4.13

Note: The above tariffs are only indicative and calculated as an average for each type of consumer. Actual tariffs vary based on several factors such as supplying utility and proportion of variable to fixed charges.
As can be seen, some consumers at certain locations can save immediately from rooftop solar. It should be noted that the cost of solar power is fixed for the next 25 years while the cost of grid power will continue to increase, thereby increasing the savings from a solar PV plant in the future.

High Cost of Diesel Power

Compared to solar power’s Rs. 6.0-7.50/kWh, diesel generators generate power at about Rs. 16/kWh (a litre of diesel generates around 3-4 kWh). Diesel power can be even more expensive once other losses such as pilferage, evaporation, etc. are considered. In some applications, such as rural telecom towers, diesel power can cost as much as Rs. 40/kWh!
The cost of diesel power has seen a steep increase over the last 10 years, shown in this chart

Diesel Prices from 2002 to 2015

A price increase of around 300% since 2002 and 45% since 2010 is serious cause for concern for many businesses and residences that depend on diesel power. In India, we saw in May 2015 that diesel prices were being increased in spite of the overall depressed crude oil prices worldwide. One can hence be reasonable to expect a continuous diesel price increase trend in India, regardless of fluctuations in the global crude oil market.
This continuing upward trend in cost of diesel power makes a compelling case for residences and industrial/commercial units that consume a lot of diesel to switch to solar power.

Urge to Go Green and Corporate CSR

There is a niche among industrial and commercial establishments that are keen to go solar on their rooftops. Solar Mango has worked with many of them between 2012 and 2015 in which we saw from close quarters how many of these establishments had installed rooftop solar power plants.
The driver for this segment is more the aspiration to go green rather than the economics.
While it is difficult to state specific sectors, demographics, or regions that are strong on the Go Green behaviour, Solar Mango urges entrepreneurs to have a special focus on this segment, as this is the segment that focuses on quality and not costs alone. Thus, as an entrepreneur catering to this segment, you will get the satisfaction of implementing a high quality plant for a discerning customer.