One-third of 40 GW rooftop solar target expected to be achieved by 2022
As per JMK Research, by the end of 2022, the rooftop solar capacity in India is likely to reach 15-16 GW, which is only one-third of the 40 GW target set by the Government. In CY2019, India added about 2.1 GW of new rooftop solar capacity, and we are estimating another 2.5-3 GW of new rooftop solar capacity likely to be added in CY2020. However, there can be a correction of about 20-30% in this number because of ongoing Coronavirus issues. The impact of this is likely to be visible in Q2 2020 (Apr-June).
Key trends that will shape up rooftop solar market growth in India in the next few years will be:
- Residential segment will pick up pace: Prime reason will be increasing consumer awareness on the benefits of adopting cleaner technologies and cost savings. Another reason is the Government push wherein new national programs like Rooftop Phase II are introduced, under which DISCOMs are incentivised to promote rooftop solar.
- Adoption of battery storage technologies from next year onwards. As per JMK Research analysis, tariffs for C&I consumers adopting rooftop solar+battery storage will be commercially viable in most states from next year onwards.
- OPEX model will be a preferred model for C&I consumers as the market has evolved in the last few years, and financiers, project developers, and end consumers are much more aware of the benefits of this model. Many companies that do not want to invest in their non-core operations will continue to opt for OPEX model.
- MSMEs share to grow: OPEX model till now is adopted only for good credit rating C&I consumers. However, this market is going to be saturated in the next few years, and project developers/ RESCO players would start tapping micro, small, and mid-size enterprises (MSMEs) that have a good balance sheet but may/ may not have good credit ratings.
- Affordable financing: Concessional loans to good creditworthy RESCO players who are implementing projects for MSMEs will lead to the increasing adoption of rooftop solar.
Even though there are many avenues for growth in the Indian rooftop solar market, there are new regressive policies that have increasingly been imposed by various state regulators in the last one year itself. Uttar Pradesh and Tamil Nadu have restricted net metering connections only for residential consumers. Recently Maharashtra also has imposed a new type of Grid Support Charges (GSC) based on the cost of setting up distribution infrastructure, cost of balancing the grid, and banking of energy. These charges will be paid by the rooftop solar developer and are yet to be decided by MERC.
The rooftop solar market is still in the growth phase in India, and such restrictive policies and charges at this phase of market growth are likely to hamper the future investments in this segment. The Indian government needs to address these regulatory hurdles efficiently to scale up the capacity additions.