Home » Opinion: Future of rooftop solar post-COVID-19

Opinion: Future of rooftop solar post-COVID-19

Opinion: Future of rooftop solar post-COVID-19

COVID-19, which is a once in a century event, has taught businesses to focus on being lean and cost-efficient. It has become vital to increase savings and cut expenses. With a focus on cutting costs, electricity bills have become a topic of discussion. Moreover, the positive experiences of businesses who have previously installed a roof-top solar project have given them the impetus to power their factories, warehouses, supply chain and corporate offices with clean solar power. As the economy gradually opens, we will see a lot of big industries and commercial units opting for the solar roof top.

In a report by Mercom India, India’s cumulative solar rooftop installations reached about 4.4GW at the end of 2019. However, due to the pandemic, only 85MW was installed in 2Q2020.

Despite the gradual easing of the lockdown, roof-top solar installations have shown a dramatic decrease. As per our analysis, we see this as a blip on the radar and the coming quarters will show increased installation activity. Commercial and industrial sectors will lead the growth and it remains to be seen whether there would be a rise in the residential sector post-COVD-19.

Having said that there is an elephant in the room; government policy that needs to be understood very carefully as it could potentially derail the sector shortly. 

The Current Situation
Over 150 days of lockdown due to the COVID-19 pandemic has resulted in increased spending, thousands of job losses and businesses being shut with every sector getting impacted. Major transportation services such as airlines, railways, buses and taxis were either shut or scarcely available. Moving materials and labour was another major challenge. People were afraid of the unknown and postponed work that involved the inflow of people into their factories or offices. Local lockdown protocols further aggravated the pain. Hence, we saw a dramatic drop in roof-top installations for the July-Sep 2020 quarter.

Conversely, key decision-makers working out of their homes and not travelling meant more time to discuss newer initiatives. The increased use of video conferencing platforms and other digital tools enabled productive discussions about solar and its integral role in driving cost-efficiencies in the cost of power. With a focus on increasing savings and cutting down on unnecessary expenditures, roof-top solar projects are increasingly getting sanctioned by commercial and industrial consumers. With Unlock 5.0 in motion and increased ease in movement of materials and labour, we are likely to experience a sharp recovery in roof-top installations.

Government Policy
The big elephant in the room affecting the future of roof-top solar in India is and has been government policy. Frequent changes in state government policy have made things difficult for both consumers and developers. There are two important tenets of government policy that can potentially derail the roof-top solar segment.

A. Obsession with Make in India
Policymakers have been obsessed with making solar modules and equipment in India. Over the last five years or more, there have been levies such as safe-guard, customs to arrest the growth of imports. However, domestic manufacturers have been unable to ramp up capacities with imports still meeting 90 per cent of the solar module demand in India. Recently, the government re-imposed the safe-guard duty at 14.9 per cent and has kept the threat of basic customs duty (BCD) hovering over everyone’s head. There have been reports suggesting BCD being applied at the rate of 10-40 per cent, which promises to increase the cost of solar installations by 7-30 per cent. BCD if applied, will drastically increase the cost of projects that, in turn, will adversely affect growth.

Domestic manufacturers are simply unable to match the price and technology being offered by their Chinese counterparts. And current protectionist policies are not helping them to improve and are instead leading to an increase in the price of solar power for all industries. Hence, do the Make in India campaign for solar help solve problems or increase the cost for all other industries?

B. Flip flop in Net-metering limits and policy
Net-metering is a key policy tool that allows prosumers to export the excess generation from their solar plants to be set-off against their imports. This key policy tool ensures solar plants can run throughout the year uninterrupted by the consumption profile of the industry on whose roof it is setup. Recently, in the draft, Electricity Rights of Consumers, 2020, the Ministry of Power has proposed to cap net-metering for loads up to 5KW and for that above 5KW, it has proposed gross metering. If this draft becomes law, the entire roof-top solar segment will virtually come to a halt. A 5KW roof-top system is only capable of powering a 2 tonne Air conditioner for 10 hours daily!

Most industries work five to six days a week with national and religious holidays bringing the total number of off-days to 65-70 days. During off-days, the load of the factory unit drops but solar continues to generate power. With net-metering, the factory owner can export this generation to the distribution company, who in turn can sell that power to the factory next door. It saves the distribution company the cost of transporting electricity over hundreds of kilometers of cables while also ensuring that clean solar power can run uninterrupted for 365 days. Without net metering, solar plants would have to be shut-off for 65-70 days thereby making it impractical for most industries to install. Moreover, even if solar systems are installed, they would have to be of much-reduced capacity as solar power peaks during lunch hours when factory loads drop momentarily.

If we look at the growth of the roof-top solar installations in Karnataka and Uttar Pradesh where net-metering is no longer available, the above point would stand validated.

Future Road Map
The future road map that should come from the government is one that should incorporate the concerns of the Utilities while also protecting the rights of the consumers. The draft electricity rights of consumers 2020 is a shame for those consumers looking to put roof-top solar to help protect the environment and reduce their electricity spends. Firstly, the focus of the government towards Make in India needs to be comprehensive in nature that invites investments in the supply chain for modules such as a solar wafer, ingots and cell manufacturing. Domestic competitiveness against Chinese competitors should be achieved through better technology and cost structures rather than trade barriers such as safe-guard and customs duty.

Moving on, net-metering is key a policy tool that allows solar plants to run interrupted for 365 days a year. The focus should stay on increasing roof-top solar installations. Utilities are affected by roof-top solar installations as consumers consume less of their power.

Moreover, the net-metering policy treats the utilities like a storage device without compensating the utilities for the cost. Hence, the right way forward would be to either buying the exported units at the average power purchase cost (APPC) rates or to levy the real transaction cost of using the distribution system for exporting surplus power on the consumer. Maharashtra has taken the lead in announcing a policy for 2GW of roof-top solar power, post which ther

Comments

Leave a Reply

Your email address will not be published.